Indonesia to Raise Power Tariff to Plug Budget Deficit

An Indonesian senior official said that power prices will surge by an average of 10 percent from April under a government plan to ease the budget deficit, a local media reported here on February 7, 2012.

Widjajono Partowidagdo, deputy energy minister, said on February 6, 2012 that the proposed increase could save up to 8.9 trillion rupiah ( about 997 million U.S. dollars) in electricity subsidy costs.

Energy subsidies for the government soared by 61 percent to 65. 8 trillion rupiah last year from 40.7 trillion rupiah 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, PLN.

This year, the government plans to limit the electricity subsidy bill to 45 trillion rupiah, which involves an average 10 percent increase for the basic electricity tariff. Without it, the bill would soar to 53.9 trillion rupiah.

Widjajono said such an increase "would not pose problems to 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 Jakarta Globe reported.

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.