Indonesia to hike electricity prices

Indonesians will pay more for electricity beginning April to help plug the country’s widening budget deficit.

The Ministry of Energy and Mineral Resources said electricity tariffs will jump by 10%. Deputy Energy Minister Widjajono Partowidagdo said the increase would not pose problems for industries.

Low-income consumers who use less than the designated amount of power, however, can expect some government protection from the price hike. The increase has to be approved by the House of Representatives.

Widjajono expects the proposed increase to save the government up to US$997 million in electricity subsidy costs.

Energy subsidies jumped 61% to US$7.3 billion in 2011 from the US$4.5 billion set aside in the national budget due to the rising cost of imported oil used by a number of power plants of the state-owned power utility, Perusahaan Listrik Negara.

The government intends to limit the electricity subsidy to US$5 billion this year. Attaining this goal, however, requires that power rates rise by an average of 10%. Without this price hike, the government will have to raise the subsidy to US$6 billion.

Electricity, water, gas, fuel and housing costs constitute some 21% of the consumer price index. Prices in January rose some 4% from a year earlier, the lowest inflation in 22 months. The 10% price increase could add 0.3 percentage points to the inflation rate.