Monday, June 14, 2010

Electricity for the Poor and for the Rich

Last Saturday, President Director of the State Electricity Company (PLN) i.e. Dahlan Iskan, proposed the government and the House of Representative (DPR) to free poor people from paying electicity, and increase electric tariff for rich people.

Considering that PLN has been unable to supply suficient electric power to its 40 million consumers in recent years, this proposal has received mixed reactions from members of DPR.

Please find below an article about this that I quoted from The Jakarta Globe.

A proposal to provide free electricity for the poor and hike rates for the rich has received mixed reactions from the House of Representatives.
A proposal to provide free electricity for the poor and hike rates for the rich has received mixed reactions from the House of Representatives.

‘Free Electricity for Poor’ Plan Gets Mixed Reviews 

A proposal by a state enterprise executive to make electricity free for tens of millions of poorer Indonesians and hike power rates for the rich has received mixed reactions from lawmakers.

Dahlan Iskan, president director of state-owned power company PT Perusahaan Listrik Negara, on Saturday urged the government and the House of Representatives to free users with an hourly average of less than 450 watts from having to pay the basic electricity tariff, or TDL.

Dahlan said the bulk of this group were the country’s poorest people, and made up half of PLN’s 40 million subscribers. As subscriptions usually mean a household, the move would potentially help 20 million families.

Dahlan said it should come before the TDL is raised by a planned average of 10 percent in July. If the government is really out to help the poor, he said, “the best thing to do would be not to charge the poor for their electricity usage.”

Only Golkar aired support for the proposal, with its faction secretary, Ade Komarudin, saying subsidies should not be given to those undeserving.

“But there must be a rigid scheme, that this is only for the poor,” he said, using the occasion to defend Golkar’s widely criticized proposal to give each lawmaker Rp 15 billion ($1.6 million) to develop his or her constituency as another pro-people move.

Sutan Batugana, a lawmaker of the ruling Democratic Party sitting on Commission VII that deals with energy affairs, aired opposition to the scheme.

“Some think everything that is free is good, but I don’t agree,” he said. “I asked Dahlan Iskan already, why would you say all this when PLN still owes Rp 25 trillion to state oil and gas firm Pertamina? Don’t teach people to be lazy.”

Commission VII deputy chairman Effendi Simbolon, from the Indonesian Democratic Party of Struggle (PDI-P), said the company should carefully study the financial consequences of the policy in detail before officially proposing it to the legislative.

“It was an unofficial statement, but if he [Dahlan Iskan] is serious, he needs to do his homework and submit a proposal to the commission,” Effendi said.

He said the scheme would be unfair to the country’s working class as they would end up having to pay more for electricity. “We shouldn’t teach the nation to hate people with money.”

Prosperous Justice Party (PKS) secretary general Anis Matta said it had yet to decide its stance, but was leaning toward disagreeing with the idea. “Rich people are also paying a higher burden of taxes. I think this needs to be studied a lot more before we decide anything.”

M Romahurmuziy from the United Development Party (PPP) said PLN should have discussed how a plan like this might work with the Energy Ministry before making it public, and throwing ideas around that don’t make good economic and social sense would only disappoint people.

Dahlan said that if large consumers of electricity, or those using above 1,000 watts per hour, were to pay prices based on actual production costs for a year, it would add an extra Rp 28 trillion to PLN’s annual revenues.

Dahlan also vowed to make PLN a more transparent state-owned enterprise and to figure out ways to make the entire agency less bureaucratic.

“I have proposed the Corruption Eradication Commission [KPK] to have direct access to our procurement procedures, and the State Audit Agency [BPK] direct access to our finances.”


umihoney said...

This is not a sound idea although it is a noble one.What is needed is an alternative source of energy which is cheaper and efficient and cost effective.What most ppl dont realise is that the urban poor are worst than the rural poor.Higher utilities will cripple them.

lincoln said...

UNBELIEVABLE!!! What a suggestion. They are going to make the Middle class poorer and thus increasing the number of poor. And i definitely agree that this will advocate laziness and worse!, this may cause more eco problem as the poor may not attempt to save electricity consumption since it's free. UNBELIEVABLE!!!

Yari NK said...

I'm not really sure whether this plan is gonna work or not. But it seems funny because free electricity for the poor plan contradicts the plan of PLN to hike power rates. I'm sure PLN will not be able to maximise their service through this way because the additional income of PLN coming from the rich will fund the free electricity for the poors. So there will be notthing left to improve the service. Apart from that, the price of commodities will hike too since the power rate for the industry will also hike...

H. Nizam said...

Yes, especially that the electricity company has been facing very bad financial conditions and surviving based on state subsidy. Implementation of such plan would make things worst.

Free electricity would make people take electricity for granted, they would not save it and make them lazy like you said.

In order to subsidize for the poor PLN would have to incredibly hike electricity tariff for the rich and surely industry/business. This will cause commodity prices jump up very high. At the end of the day, the poor would suffer.

colson said...

A remarkable proposal. And to me it seems runs against the tide of the times - but the ideas of it appeals to me.

It would have been an even better one though if the proposal announced progressive tariffs: very low if one uses little electricity and increasingly higher if one uses more. The knife would cut both ways: it would favour the poor and it would encourage to deal carefully and economically with energy.

Yet the one thing which is crucial in the article is the advice to Dahlan Iskan to do his homework first.

H. Nizam said...

Hi Colson,
The idea is good, it would relief the poor of the miseries.
However considering that PLN has been reported to suffer big financial losses for many years, which is part the recent they want to hike tariff, therefore implementation of the plan would be suicidal.
Even right now industries are complaining about high tariff and insufficient electricity.

Trippi said...

this would have benn a great idea!

H. Nizam said...

Hi Trippi,
Under normal circumstances it
would have been a great idea. Unfortunately the electricity company is currently not in a condition at all to provide free electricity. They can't even survive without state subsidy now.

Anonymous said...

This quite seems a good idea thoug , let see what happens.


H. Nizam said...

Adeel Imran,
The latest news on TV said that PLN has dropped this "free" idea.

stromverbrauch said...

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H. Nizam said...

You seemed to be able to read my mind, because I plan to write about the plan to increase electricity by 1 July. Thanks.

RajH said...

Hi Nizam, thanks for visiting my blog The photograph on this post inspired me to write down my comment here you know the situation you are describing is same like here in India and there is no much difference between two country. Different political parties and different agendas. Well it seems blogging is your passion, I read your others post and i like it.Keep blogging and happy blogging!

H. Nizam said...

As developing countries, Indonesia and India have lots in common including difficulty in providing electricity.
Thank you for your visit and kind comment.

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strompreise said...

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