Indonesia's Industry Ministry is seeking to water down the implementation of power tariff hikepolicy for the industrial sector in a bid to avoid weakening competitiveness of local productson the global market, a minister said here on Tuesday.
The move came after the implementation of higher electricity tariff for medium-sized and largeindustries on May 1 had drawn complaints from the sector.
Under the new price hike policy, the power tariff for medium- sized and large industries will beraised by 38.9 percent to 64.7 percent in a step-by-step manner from May 1 till Nov. 1.
Industry Minister Hidayat said that the ministry was seeking the means of relaxation of the policy and expected the rules on the relaxation to be completed in June and come into effectivebefore October.
"Tomorrow I will have a meeting with senior officials to find out in what forms the relaxation canbe implemented. And of course the suggestion from the industrial sector would also beconsidered, " he said.
"It is expected to be applied to export-oriented industries, petrochemical industry, iron and steelindustry and labor- intensive industries," said Hidayat.
Experts have said that the tariff hike may weaken the competitiveness of Indonesia's productsboth at home and abroad as local producers tend to lift prices to cushion the tariff hike.
Domestically, it will be difficult for local products to compete with products imported from thosecountries where manufacturers enjoy lower electricity tariff or are given subsidizes.
The Southeast Asia's biggest economy, with a population of over 238 million and a growingnumber of middle-income people, has a huge and favorable market for importedproducts.
Indonesian Finance Ministry has said that the power tariff hike policy could cut subsidies totaling8 trillion rupiah (694.99 million U.S. dollars).
Nevertheless, Hidayat said the risks with the industrial sector are much more than that.
Indonesia is scrambling to slash huge subsidies on energy, including electricity, to set asidemore funds for infrastructure development in order to boost economy.
So far, Indonesia only has about 47,000 MW commercial power generating capacity, and isbuilding power plants with total capacity of some 3,000 MW, according to Nur Pamudji, headof state electricity firm PT PLN.