Govt to End Electricity Subsidy for 18m Households in June

The government will stop subsidizing 18 million electricity customers in June, as part of its efforts to cut state spending. (Antara Photo/M. Agung Rajasa)

By : JG | on 6:12 PM April 02, 2016
Category : Business, Economy

Jakarta. The government will stop subsidizing 18 million electricity customers in June, as part of its efforts to cut state spending.

Indonesia is at risk of losing out on $19 billion in revenue this year amid weak economic growth, low global commodity prices and uncertainty over its tax amnesty plan.

"We are aiming to drop the subsidy in June," Energy and Mineral Resources Minister Sudirman Said said on Friday (01/04).

State utility Perusahaan Listrik Negara (PLN) estimates that only 4.2 million of the 22 million subsidized households, consuming 900 volt-amperes of electricity, are entitled to the aid. The remainder have sufficient purchasing power to buy electricity at the normal rate.

Sudirman said those 18 million customers could see their electricity bills rise by 140 percent in stages by the end of this year.

The government planned to cut its electricity subsidy to Rp 38 trillion ($2.9 billion) this year from Rp 66 trillion last year, assuming that it stopped subsidizing households in January. Sudirman did not say how much the government stood to save now that the subsidy would only be phased out in June.

Standard & Poor's Financial Services had said earlier that Indonesia needed to eliminate the remaining subsidies in order to gain the global ratings agency's much-coveted investment grade.

S&P is the only major ratings agency besides Moody's Investors Service and Fitch Ratings that still rate the country's bonds as junk. That prevents major global pension funds and other long-term investors from investing in Southeast Asia's largest economy.

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