Wednesday, February 6, 2008

PLN says power subsidy not enough for this year

[ jakartapost ]

Ika Krismantari, The Jakarta Post, Jakarta

On the back of higher global oil prices, state power firm PT Perusahaan Listrik Negara (PLN) has asked the government to raise its power subsidy for this year.

PLN president commissioner Alhilal Hamdi said Tuesday the company would ideally need Rp 70 trillion (US$7.5 billion) in subsidies this year following the change in the state budget's oil price assumption to $80 per barrel from $60 per barrel.

He said the government's plan to raise the electricity subsidy to Rp 42.6 trillion from Rp 29.8 trillion allocated previously would not only be insufficient but would also stretch the company's financial resources.

"We estimate that we will need about Rp 70 trillion this year," Alhilal said after a meeting with the House of Representatives' Commission VII for energy and mineral resources.

Should the government and the House turned down the request, Alhilal said, the company would seek loans from local lenders to help the company plug the gap in the subsidy.

"We hope we can get the subsidy revision in the middle of this year. For the time being we will use the existing subsidy allocation already approved by the House," he said.

Based on an average oil price assumption of $60 per barrel, the House has agreed to provide PLN with Rp 29.8 trillion in subsidies for the 2008 state budget.

The subsidy is needed in order for the country's households to enjoy affordable electricity rates, which are set below the normal market price.

Following the surge in global oil prices, the Finance Ministry has proposed to the House it raise the power subsidy to Rp 42.8 trillion to prevent electricity rates from soaring.

Commission member Tjatur Sapto Edi said the commission had not yet discussed PLN's subsidy proposal.

"We hope PLN can find alternative fuels to generate its power plant so as to reduce operation costs," he said.

Currently, 30 percent of PLN's power plants run on diesel fuel.

Due to soaring global oil prices last year, the subsidy for electricity was raised by 33 percent to Rp 43.4 trillion from the original allocation of Rp 32.44 trillion.

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