Jakarta, April 28 (Antara) - The basic electricity tariff hike may
increase production costs, particularly of domestic textile products by
about 15 percent, thus weakening their competitiveness in the face of
next year's ASEAN Economic Community (AEC).
"The production cost of both up and downstream textile products is
expected to rise by 15 percent when the basic electricity tariffs
increase in May," General Chairman of the Indonesian Textile Producers
Association (API) Ade Sudradjat said.
Textile industries have predicted that the competitive edge of
Indonesia's textile products will therefore be weakened in the face of
the ASEAN Economic Community, which will begin next year.
"The increase in the basic power rate (TDL) beginning on May 1, 2014,
will affect production costs. I am afraid it will disturb the
performance of industries, particularly that of big industries, amid
preparations to enter the AEC," Industry Minister MS Hidayat said on
Monday.
Electricity tariffs for large-scale industries will increase in the
range of 8.6-13.3 percent every two months as of May 1. The increase is
based on the results of a discussion with the House of Representatives
and the Energy and Mineral Resources Ministry.
The government will no longer subsidize the electricity tariffs for large-scale industries as of November 1.
It had issued the Energy and Mineral Resources Minister's Decree No.
9/2014 on Electricity Supplies, in which the state-owned company PLN was
given the task of setting the power tariffs for large-scale industries.
Under the regulation, which the energy and mineral resources minister
signed on April 1, the electricity tariff hikes for publicly-listed
companies using more than 200 kilovolt amperes (kVa), known as Group I3,
will be 8.6 percent every two months.
The electricity tariff hike for industrial consumers using more than 30
thousand kVa, known as Group I4, will be 13.3 percent every two months.
The electricity tariffs for Group I3 will be increased by 8.6 percent
and for Group I4 by 13.3 percent four times in 2014. After May 1, the
electricity tariffs will be raised on July 1, September 1 and November
1, 2014.
In total, the electricity tariffs for Groups I3 and I4 will increase 38.9 percent and 64.7 percent, respectively.
According the Industry Minister MS Hidayat, four industrial
associations, textile, steel, petrochemical and cement producers, have
lodged complaints over the electricity tariff hikes.
One of the impacts of the tariff hikes is the weakening of products'
competitiveness of the national industries as they will face the burden
of high production costs.
A high cost will lead business players to reduce the specifications and
excellence of their industrial products, apart from raising the rate of
their sale prices.
"Those who visit me represent 400 industries. They are aware of the
fact that it is important for the government to raise the electricity
tariffs but they are also questioning how to maintain their
competitiveness. They asked for the extension of their installment
period," the minister said.
According to Hidayat the government saves on an efficiency value of Rp8
trillion from the power tariff hikes, but there is no guarantee that
the Rp8 trillion value will exceed the adverse impact it may have on the
industrial performance.
"I
heard that the elimination of the subsidy will earn the government some
Rp8 trillion, but the question is that whether it exceeds the impact it
may have on the weakening of industries," the minister said.
Minister Hidayat is planning to gather businessmen from industries to
calculate the value that will be suffered from the weakening of the
industries due to the tariff rate increase.
Besides weakening industries, the electricity tariff hikes will also
led to a flood of imported goods in the country because of the decline
in local products' competitiveness. After all, by next year, the country
will enter the free market within the AEC scheme.
"Imports will flood the country because such goods will face no
significant competition. This will lead to larger imports. The
government is determined to reduce deficit, but its policy will raise
imports," API chairman Ade Sudradjat said.
He said the imports of textile and textile products can rise by 100
percent. Now, textile imports were about 75 percent of the import
capacity.
As a result, textile companies will likely lay off some of their
workers to lower their production costs, he said, adding that
electricity currently accounted for 20-35 percent of textile companies'
production costs.
"We have 1,200 textile companies, which employ around one million
workers. Some of them will be under a threat of layoff in the short
term," he said.
The Semarang branch of API said layoff is the last resort to cope with
the impact of the government's plan to raise the electricity tariff.
"There are a number of ways, such as efficiency in energy consumption.
We have not yet thought of layoffs," the API branch chairman Agung
Wahono said.
Efficiency in energy consumption, such as by reducing the use of
electric motors and lamps, is an alternative, Agung said, adding "Both
the Apindo (the association of businessmen) and the API agreed that
there will be no dismissal of workers."
Job cut is used only when companies can no longer sustain the operating cost," he said.
Another alternative is by raising the selling prices after negotiations with buyers, he added.
"If price hike is the alternative, it will be made gradually to allow buyers to adjust to them," he said.
Price increase will likely be 5-7 percent, not enough to offset a 10
percent increase in production cost as a result of the tariff hike, he
said.
Therefore, the ministry of industry is doing its best to formulate a
compensation facility for industries affected by the power tariff hikes.
"I
am thinking of how to design a compensation plan for companies over the
electricity tariff increase so that industries will remain
competitive," Director General for Basic Manufacturing Industry Harjanto
said meanwhile.
He said the increase in the electricity tariff will cause the influx of
imported goods into Indonesia. "This is because our competitiveness
will weaken as a result of the power rate rise."
Imported
goods will flow in if production costs in the domestic market increase.
Domestic products will be difficult to compete, thus businesses will opt
to import goods," he said.
He said the power rate hike will mostly affect the production of upstream goods.
"One of our homework is how to overcome the impact of textile raw material imports," he said.
Harjanto said his side had sent a letter to President Susilo Bambang
Yudhoyono about a proposed solution to the matter but had not yet
received any response.
"We have sent the letter. The letter also included inputs from (textile producers) associations," he added.***2***
(A014/INE)
EDITED BY INE
(T.A014/A/BESSR/A. Abdussalam) 29-04- |
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