Indonesians will pay more for electricity beginning April to help plug the country’s widening budget deficit. The Ministry of Energy and Mineral Resources has decided to raise electricity tariffs by 10% as a way to help lower the country’s widening budget deficit. Low-income consumers can expect some government protection from the price hike.
The increase has to be approved by the House of Representatives prior to implementation. The proposed increase to save the government up to US$997m in electricity subsidy costs. Energy subsidies jumped 61% to US$7.3bn in 2011 from the US$4.5bn 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$5bn 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$6bn.