Indonesia Wary of 'Free Electricity for Poor' Proposition

Jakarta (News Today) - State-owned power utility company PLN president director Dahlan Iskan has come up with the idea to provide low-income people with electricity free of charge but the proposal has been met with cautious responses from the government and the House of Representatives.

"The proposition is well-meant and could be a solution, but I cannot yet respond to it in either a negative or positive way. I have to look at its assessment first. What is meant by ’free of charge’," Chief Economic Minister Hatta Rajasa said on Monday.

The coordinating minister for economic affairs said the idea which was raised by the PLN president director to free poor people from electricity bills needed to be further studied. The same cautious stance was also adopted by the House of Representatives DPR). Since the proposal has not yet been submitted to the parliament, the DPR is not yet available to give its response.

"The discourse to make electricity free for the 450-VA customers has not yet been officially proposed by the government to the House of Representatives (DPR). Therefore, House Commission VII is not yet available to give an official response," Effendi Simbolon, deputy chairman of the House Commission VII on energy affairs, said.

Dahlan Iskan on Saturday proposed providing poor people in the country with electricity free of charge, and the rest of the population according to the market price.

"I am serious, I made the proposal in Parliament yesterday (Friday). The government has not yet responded because they think I was joking. I was not," Dahlan said at a public discussion on the basic electricity tariff, organized by non-governmental organization Forkem and the economic affairs coordinating ministry at Pulau Bidadari over the weekend.

In response to the proposal, the government reacted with cautious response. According to Minister Hatta Rajasa, the government should be cautious in considering the proposal. It should be deliberated thoroughly before a decision on it could be taken.

"I hesitate to agree or not to agree. We have to be careful in this case," Hatta Rajasa said. After all, at present the discourse on the basic power rate increase by 10 percent and the restriction of electricity subsidy for industry had raised public protests and opposition. Thus, the (free electricity) proposal still needed to be further studied.

Previously, Dahlan Iskan explained his idea about his proposal. He said by "poor people" he meant citizens with a power facility of 450 Kwh whose number all over Indonesia was estimated at 20 million. The homes of these people on average had five lights, a television set, a radio, a VCD player, a rice cooker, an electric fan and iron.

With these 20 million PLN customers paying zero rupiah for electricity and the rest of the population paying their electricity bills according to the market price, PLN would still make a profit, he said. By giving poor people free access to electricity, PLN would lose an income of about Rp1.5 trillion but its earnings from the rest of the population, charged according to electricity’s market price, would increase by Rp20 trillion.

"If we are so cruel as to make the poor segment of the population also pay according to the market price, PLN’s income would rise by Rp40 trillion," he said. Dahlan said his idea was a concrete proposal to help the poor and meant to answer those who opposed increasing the electricity rates on the ground it would make the poor suffer.

He said PLN had so far always been suffering losses and needing government subsidy to cover its production cost of Rp1,200 per KwH while it was selling its electricity for an average of only Rp650 per KwH. An increase of only 10 percent in electricity rates would not stop its losses nor free it from dependence on government subsidy.

In his response to the matter on Monday, House Speaker Marzuki Alie said that freeing the poor from the obligation to pay for the electricity they consumed was not good for the government’s campaign to promote efficient energy consumption.

"If the PLN is willing to reduce the burden of poor people, it should not provide them with electricity free of charge but with subsidized power or power at a special rate," the House Speaker said. Poor people who are PLN customers in the R1 category should be given a subsidy through a special tariff so that they could be educated in energy efficiency. Moreover, the dicourse on free electricity for the poor was difficult to realize because the cost of electricity procurement was very high.

"If the idea is realized it will cause the poor to forget the government’s campaign to enourage people to consume energy efficiently," Alie, a former secretary general of the ruling Democrat Party (PD), said.

After all, according to Commission VII deputy chairman Effendi Simbolon, the plan is unlikely to solve the problems being faced by PLN, but switch them to other customers.

"As long as the cost from the R1 customers is not borne by other customer categories, the free electricity proposal is OK. But if it is referred to other customers, it would only create a new problem," Effendi Simbolon.

So far, the cost burden for the 450 VA customers was Rp1.4 trillion per annum. But Simbolon said that the discourse to make electricity free for the 450-Va customers had not yet been officially proposed by the government to the House of Representatives DPR. Therefore, Commission VII is not yet available to give official response.

"I need to say that Mr Dahlan raised the issue spontaneously because he was frustrated by the many constraints he is facing in the PLN management," Effendi said. He said that the PLN director should have expressed his frustration to the government because it was not able to solve the problem immediately.

"If Dahlan has challenged the DPR, he has made a mistake because he should have aimed his challenge to the President so that he would soon provide a solution to the PLN problem," the legislator said.

Source : kompas.com

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