New Guidelines on the Usage of Local Products for Electricity Infrastructure Development

The Minister of Industry recently issued Regulation No. 48/M-IND/PER/4/2010, containing new guidelines on the mandatory use of local products by certain electricity infrastructure developers.

Electricity infrastructure developers that are bound by the provision to use local products are those developing infrastructure for the public interest, defined as infrastructure that draws upon the state budget, regional budget, grants, and / or foreign loans. According to Article 2 (2) of the Regulation, those include state- and regionally-owned enterprises, private legal entities, and cooperatives.

When constructing electricity infrastructure - power generators, transmission grids, distribution grids, and so on - the abovementioned parties must employ local services and use local goods. Although they do not need to exclusively use local goods and services, they must fulfill the ‘Local Components Level’ - a benchmark to measure the amount of local product used in every electricity infrastructure development.

The Local Components Level -Tingkat Komponen Dalam Negeri (TKDN) -varies depending on the type of infrastructure project; there are 6 categories. They include: Steam-Powered Electricity Plant (‘PLTU’), Water-Powered Electricity Plant (‘PLTA’), Geothermal-Powered Electricity Plant (‘PLTP’), and Steam Gas-Powered Electricity Plant (‘PLTGU’).

For example, in a 100 Megawatt PLTU infrastructure development, the required Local Component Level is at least 38.00%, whereas for a PLTGU development, it is only 30.67%. Further explanation as to how those numbers are computed and what must be done to satisfy those percentages can be found in Chapter II of the Regulation.

The Regulation also governs matters relating to the construction activities involved in each type of electricity infrastructure development, including who is to be in charge of the construction; provisions on this are found in Articles 13 to 18 of the Regulation.

In the event that provisions of the Regulation are breached, both administrative and financial sanctions are available, ranging from revoked licenses to fines, and are elaborated in Chapter VI of the Regulation.

The Regulation repeals and replaces previous regulation on the same subject matter, namely Regulation No. 04/M-IND/PER/2009, and has been in force since 19 April 2010.