Indonesian Textile Association (API) chairman Ade Sudrajat said Tuesday that business owners in the textile industry had been tested by soaring raw material prices and import duties. An electricity price increase would absolutely kill their businesses, he added.
“The November -January  period is a cloudy time for us. From October to December, the price of cotton fiber surged and then followed polyester and rayon [surged]. If the power prices increase in January, we would pay between 18 percent and 22 percent more,” he told reporters at the Industry Ministry in Jakarta as quoted by detikFinance news portal.
He said the removal of the cap, which would allow PLN to raise electricity prices for industries by between 2 and 22 percent current rates, would make Indonesia’s textile products less competitive compared to those of China and Vietnam, which applied no import duties on raw materials and machines.
In July 2010, the Energy and Mineral Resources Ministry raised electricity prices for industries by between 20 and 30 percent through a ministerial decree.
The policy drew massive criticism from businesses. In response to this criticism, the government, the House of Representatives and PLN agreed to cap the price increase at 18 percent, effective July 2010.
PLN says that according to the agreement the cap can be lifted in January 2011, meaning that business owners could face price increases of between 2 and 22 percent from the current prices.
Energy and Mineral Resources Minister Darwin Zahedy Saleh said he had demanded that PLN clarify its plan to remove the limitation.
“The ministry has not signaled its approval for PLN to execute the policy,” Darwin said after a coordination meeting at the Coordinating Economic Ministry in Jakarta.
“Before implementing the policy, PLN should report to my ministry first. Then we can discuss the plan with the House Commission VII [overseeing energy].”
Coordinating Economic Minister Hatta Rajasa said he had received no information about PLN’s plans as neither the company nor the Energy and Mineral Resources Ministry had made a report about the removal of the limitation.
PLN president director Dahlan Iskan said in a press statement that his company was in a problematic position because the company was obliged to lift the cap to comply with the 2011 State Revenues and Expenditures Budget law and the 1999 business competition law, but would face criticism from businesses if it went ahead with the price increases.
“If we don’t lift the cap, several industries will pay less than the others. That violates the 1999 business competition law. But, if we remove the cap, many industries will shout and influence public opinion [which will influence the image of the company],” he said.
Dahlan said he hoped PLN could escape from this conundrum as soon as possible so that it could get on with other important work.