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Rise in power tariff to hurt Indonesian garment sector
16
Mar '12
The planned 10 percent rise in electricity tariff is likely to negatively impact the garment industry in Indonesia, which is already facing trouble due to weakening export demand amid the eurozone debt crisis.

Speaking to fibre2fashion, Mr. Ade Sudrajat, Chairman, Indonesian Textile Association (API), said, “The Government is planning to raise the electricity tariffs by about 10 percent over the existing tariff rates from July this year.”

Explaining the affect of rise in power tariff on Indonesian garment industry, he says, “Indonesia has a good textile industry set up from the upstream fibre-making to downstream apparel-making, which includes all the processes that come in between. For garment industry, the electricity charges constitutes only 1 percent of its cost of production, but for its upstream textile industry, electricity cost accounts for about 15 percent of cost of production. So, the rise in power tariff will have a snowballing effect on fibre-makers, spinners and weavers. This would, in turn, be passed on to the garment industry.”

“This will result in increase in prices of garments and it will especially hurt domestic sales. With the escalating prices, it would become difficult for domestic garment manufacturers and exporters,” he adds.

Last year, Indonesia exported garments worth US$ 13.4 billion, and API expects the country's garment exports to rise by 3-5 percent y-o-y in 2012.

Fibre2fashion News Desk - India


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