Tuesday, 23rd September 2014

Electricity rate hike to weaken laborers` purchasing power

Kamis, 3 Januari 2013 17:19 WIB | 874 Views
Jakarta (ANTARA News) - An increase in the price of electricity beginning this month will reduce the purchasing power of laborers, Said Iqbal, the president of the Indonesian Workers Unions Confederation (KSPI) said.

"The hike will affect them. Although the price hike will not be imposed on 450-900 VA electricity customers, many laborers hire houses with over 1,300 VA," Iqbal said here on Thursday.

He said that with the electricity price hike, a laborer would bear a burden of about Rp15-25 thousand per month. This means that the increase in workers` wages by about 5 percent in 2013 would not be meaningful.

"Workers` increased wages will drop by 5 percent from the average hike of Rp500-Rp700 thousand per month," he added.

He said that the power rate hikes would also trigger an increase in the prices of processed goods whose production used electricity.

"House owners are now planning to increase their house rent by between Rp50 and Rp100 thousand per month," he added.

In the meantime, economic observer A Prasetyantoko of Atma Jaya University said that the increase in the price of electricity by 15 percent will not affect inflation significantly.

"An increase in the price of electricity will only affect the industrial sector. Its impact on inflation will be low, between 0.2 and 0.3 percent," Prasetyantoko said.

Therefore, he added that the electricity rate hike will not affect people`s purchasing power because the cost of some items will increase.

However, small and medium industries (UKMs) will see an increase in the cost of production. Therefore, they will increase the cost of their products and services.

"The government can reduce the production cost of small and medium industries by creating a favourable business environment. The government can provide levies, appropriate infrastructure and licenses to reduce the cost of production," Prasetyantoko said.

He added that the government should help small and medium industries, following the electricity tariff hike.

PT PLN, the state`s electricity company, has begun to increase the basic electricity tariff in accordance with Regulation No.30/2012, drafted by the ministry of energy and mineral resources.

Haryadi Sukamdani, spokesperson for the Indonesian Chamber of Commerce and Industry (Kadin), said an increase in the price of electricity will raise the production cost of steel and cement industries, and the operating cost of hotels and shopping centres, from 3 to 10 percent.

"In principle, an increase in the price of electricity by 15 percent will have a negative impact on the industrial sector. It will also increase the production cost of steel and cement industries, and the operating cost of hotels and shopping centres by up to 10 percent," said Haryadi on Wednesday.

According to him, an increase in the production cost will force companies to enhance their efficiency and revise the price of their products.(*)