Business
players predicted that the Government’s plan to increase basic electricity
tariff by 15% next year would downsize competitive edge of Indonesian products.
And yet the latest report of the World Economic Forum [WEF] had it that
Indonesia’s competitiveness level was in the 50th position or lower
compared to last year’s position at 46th.
Once
in 2010 Indonesia’s competitiveness was in 42nd position, but in the
past 2 consecutive years Indonesia’s position had been constantly falling.
Among the main causes was poor power supply for the domestic industry including
textile and textile products.
Business
circles rated that increase of electricity tariff was a heavy burden to the
textile [TPT] industry which made Indonesia’s competitiveness continue to
slump. To the textile industry, electricity constitute a big portion in the
production cost structure. To fibre producers, for example, electricity
constituted 25% of total production cost.
As
with the weaving industry, electricity’s contribution 14.4% in the production
process. Energy supply was one of the key factors in TPT production process;
but the garment industry was less reliant on electricity, the percentage in
price structure was only 1.3%.
Increase
of Basic electricity Tariff [TDL] would increase production cost and finally
increase selling price. Although TDL increase would mainly affect true upstream
industry, it would also have serious impact on the downstream industry and the
price of goods being produced. On the other hand consumer’s purchasing power
would lessen as prices of products turned less affordable.
What
producers feared was that increased production cost would force them to reduce
production output which would have the chain effect of mass dismissal of
workers. To keep selling price up by reducing production, producers had to
dismiss about 10.000 workers. It would be hard for producers to increase price
as it might lessen product’s competitiveness against imported products; even
without increasing price, competition was hard enough for local producers.
Besides,
the energy policy would affect national investment climate, among others that
investors from Thailand, Vietnam and China would cancel relocation plan of
their investment plan in Indonesia. For that matter businesspeople and
industrialists could make recommendations to the Government to postpone TDL
price increase or find solution to the matter. The national industry must not
be allowed to collapse which would injure the macro process of national
economic development.
Business
people said one thing while the Government said another. The Minister of Energy
and Mineral Industry assured that subscribers of electricity would have their
subsidy, although tariff was based on the increased version of 2013. According
to the Minister of Energy and Mineral resources, increase of electricity tariff
was based on Law no 30/2007 on energy. The law had it that tariff of energy was
based on justifiable economic principles while the Government extend subsidy
for the low income group.
The
increase of Electricity tariff of 15% was an average percentage, the tariff for
each respective type of subscribers varied. However the specification of tariff
for each type of subscriber still had to wait for the Law on APBN State Budget
2013. Furthermore the Government planned and Mineral Resources as legal base
for price increase. It was almost certain that the Regulation would be released
before tariff increase was put in effect in January 1, 2013.
According
to scenario, the number of subscribers not having any further subsidy in 2003,
i.e. household powered 6.600 VA [R3] business 6.600 VA – 200 KVA and above [B3]. However, tariff increase for
the three subscriber category was more economically reasonable price or basic
cost of procurement plus margin of 7 percent. For R2 ands B2 classified as Low
voltage subscribers [IR] the suitable economic tariff was Rp 1.352 per Kwh, while economic tariff of B3 category i.e. Rp 1.1134 per Kwh.
How
did the UMKM small business react to the new tariff / they were worried that
the TDL price increase of 15% to be in effect as per 2013, would hold back UMKM
development in Indonesia. One thing was sure; increase of TDL tariff would
weaken competitiveness of small industry so they could not compete against
imported product. This meant that they would choose to become traders rather
than producers. This was the one point to be observed by us all. Although the
Government dared not to increase tariff of 450 volt and 900 VA such meant nothing
at all to the industry. This was because there was practically no small
industry who used power below 1.300 KVA.
The
Indonesian Chamber of Commerce [KADIN] also admitted that tariff increase
production cost by around 6%. Increase of TDL would have its impact variably on
industrial sectors due to different type of electric powered equipments being
used. Truly there were some who used electric power. So the one who would be
affected were industries of high dependency on electricity power like TPT
industry, metal melting and ceramics.
Nevertheless,
as businesspeople they were trying to support Government’s plan to increase TDL
tariff but on condition that the revenues obtained from price increase be used
for infra-structure building which would propel development. Response also came
from the Ministry of Finance who was ready to discuss tariff increase plan by
15% gradually as per next year to all businesspeople who objected the price
increase policy.
Business News - October 3, 2012
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