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NEWS UPDATES Asean Affairs        12 January 2011

Indo businesses hit by tariff hike

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Businesses condemned state electricity company PT PLN's decision to revoke a cap on the electricity basic tariff hike for industry starting this month, saying that such policies may hinder the development and competitiveness of the sector.

Indonesian Textile Association chairman Ade Sudrajat claimed that PLN had not invited businesspeople -- particularly from his association -- to discuss the implementation of the policy or check their readiness.

"We haven't had a dialog with PLN about this policy. The cap revocation will slow down the growth of the industrial sector in general," he said over the phone on Monday. He calculated that if PLN lifted the cap, businesses in the textile industry would experience an average 23 percent rise in costs to pay for electricity. As a result, increased production costs would lead to higher prices making them less competitive, he added.

The Energy and Mineral Resources Ministry issued a ministerial decree on the electricity basic tariffs last year. Under the new decree, the burden on industries to pay for electricity surged by 20 to 30 percent compared to their previous bills.

Due to massive protests from businesspeople, the government and the House of Representatives, PLN agreed to cap the rate hike at 18 percent starting July 2010. PLN claims that based on the agreement, the cap will be revoked in January 2011.

The deputy secretary general of the Indonesian Businesspeople Association, Franky Sibarani, said that businesspeople would request PLN to review the policy and maintain the cap for the sake of the industrial sector's future.

"We'll meet with PLN's board of directors this week to discuss about that matter. We hope the company will keep the 18 percent cap. Regarding when the cap can be lifted, we'll also discuss that later," he said.

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