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Home » Industry News » Indonesia's Electricity Subsidy is Expected to Swell in 2016

Industry News | 01-Feb-2016 | 19:06

Indonesia's Electricity Subsidy is Expected to Swell in 2016

Indonesia's electricity subsidies may exceed the IDR 38.39 trillion (approx. USD $2.8 billion) allocated in the 2016 State Budget as there are probably more customers entitled to electricity subsidy than previously estimated. Last month, the Indonesian government and House of Representatives (DPR) agreed on cutting electricity subsidies for 450 VA and 900 VA households, per 1 January 2016, by disconnecting those people that are currently enjoying cheap electricity rates while they are not classified as 'poor' or 'near-poor' and thus do not deserve the subsidized price.

According to data from state-owned utility firm Perusahaan Listrik Negara (PLN), which holds a monopoly on electricity distribution in Indonesia, a total of 22.9 million Indonesians have electricity connections of 450 VA (paying a subsidized electricity tariff of IDR 415.5 per kWh), while a total of 22.5 million people have a connection of 900 VA (paying a subsidized tariff of IDR 586.2 per kWh).

However, it is estimated that 22.4 million people (with either 450 VA or 900 VA connections) are paying cheap (subsidized) rates while they are not classified as 'poor' or 'near-poor'. One well-known strategy to receive access to government subsidies is by installing more than one connection of 900 VA inside a home.

Starting next year the government only wants to provide electricity subsidies for the 24.7 million poorest Indonesians, allocating IDR 38.39 trillion for this purpose in the 2016 State Budget, drastically down from IDR 66.2 trillion in this year's State Budget. However, the number of (poor) people entitled to electricity subsidies may grow to 28 million next year as there remains unclarity about the number of 900 VA customers that are entitled to electricity tariffs. This figure is expected to be higher than previously assumed by the government when preparing the 2016 State Budget.

Source: Indonesia Investment


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