INDEF: Implementation Of PLN Electricity Tariff Discounts Deserves To Be Repeated To Encourage Purchasing Power

Illustration. (Photo: Doc. Antara)

JAKARTA - Head of the Institute for Development of Economics and Finance (INDEF) Abra Talattov assesses that the application of a 50 percent discount on electricity rates can be carried out again in order to boost public consumption.

"For this reason, the government needs to consider this policy so that it can be implemented again, as in the January-February 2025 period. The government's policy in the form of discounted electricity rates can be enjoyed evenly by the community throughout Indonesia," he said in a statement in Jakarta, quoted by Antara, Monday, October 6.

According to him, with the reduced burden of electricity bills, people can allocate their expenditure to other necessities such as basic commodities and essential services which can ultimately reduce domestic inflationary pressures.

During the two months of implementation, the government's program through the Ministry of Energy and Mineral Resources (ESDM), he continued, is expected to encourage additional public consumption.

Electricity tariff subsidies increase people's real income by reducing the cost burden, which can then increase purchasing power and trigger increased consumption, the effect of increasing the margin of profit to consumer (MPC) where most of the portion of revenue is spent on consumption.

"So, electricity subsidies create space for the community to increase spending on other goods and services," he said.

In turn, the additional public consumption after the electricity tariff discount finally contributed to the increase in the value of Gross Domestic Product (GDP) and GDP growth.

Abra emphasized that it is undeniable that the discount on electricity rates is a relevant policy option in providing economic stimulus that is directly felt by the community while maintaining national economic stability.

"Household consumption is the largest component in Indonesia's GDP, which is around 54.6 percent in 2024. With electricity cost savings, people will shift spending to the real sector, thus maintaining the momentum of economic growth at the beginning of the year," he said.