http://www.thejakartaglobe.com/home/indonesian-power-prices-to-rise-10-to-plug-budget-deficit/496298?utm_source=newsletter&utm_medium=email&utm_campaign=jgnewsletter
Indonesian Power Prices to Rise 10% to Plug Budget Deficit
Ririn Radiawati Kusuma | February 07, 2012
Power prices will surge by an average of 10 percent from April under a government plan to ease the budget deficit, a deputy minister said on Monday.
Widjajono Partowidagdo, the deputy energy minister, said the proposed increase could save up to Rp 8.9 trillion ($997 million) in electricity subsidy costs.
Energy subsidies for the government soared by 61 percent to Rp 65.8 trillion last year from the Rp 40.7 trillion set in the initial budget.
The soaring bill was due to increasing costs of imported oil to fuel some of the power plants of state utility company Perusahaan Listrik Negara.
This year, the government plans to limit the electricity subsidy bill to Rp 45 trillion, which involves an average 10 percent increase for the basic electricity tariff. Without it, the bill would soar to Rp 53.9 trillion.
Widjajono said such an increase "would not pose problems for industries."
The government has prepared some options that would shield from tariff increases low-income consumers who use less then a designated amount of power.
The plan still needs approval by the House of Representatives.
The price rise is set to put further pressure on household budgets, with fuel prices set to rise either through a reduction in the subsidy or a forced move to unsubsidized gas.
Finance Minister Agus Martowardojo said on Thursday that the price of global crude oil exceeding the state's 2012 budget assumption. This explained the need to push ahead with the tariff increase, he said.
According to Energy Ministry data, the Indonesian Crude Price, the nation's benchmark for crude oil, stood at $115.91 per barrel at the end of January. It was above the $90 target set in the 2012 budget, and up 4.6 percent from $110.70 in December.
Electricity, water, gas, fuel and housing costs contribute to 21 percent of the consumer price index. Prices in January rose 3.65 percent from a year earlier, the lowest inflation in 22 months.
Prakriti Sofat, a Singapore-based economist from Barclays Capital, said last week that the 10 percent electricity tariff increase would add 0.3 percentage points to the inflation rate.
Inflation eased for the fifth month in a row in January, due to milder increases in food prices, the Central Statistic Agency reported on Wednesday.
Sofat said that, along with robust domestic demand and gradual rises in food, health and education costs, the electricity tariff increase would cause inflation to hit 5.3 percent by December.
Additional reporting by Dion Bisara
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