President Joko Widodo briefs reporters after inaugurating a toll road. (Photo Credit : Public Works and Public Housing Ministry)

JAKARTA (TheInsiderStories) – President Joko Widodo summoned Minister of Public Works and People’s Housing Basuki Hadimuldjono, Minister of Transportation Budi Karya Sumadi, and several toll road owners on Thursday (22/3). The main agenda of the meeting was to discuss a possible reduction of toll road fares in certain toll road sections in return for extending the operators’ right to manage the toll roads.

Minister of Transportation Budi Karya said the President wants the tariff to be reduced as many logistic companies are reluctant to use toll roads because they think the tariff is too expensive.

“This (reducing tariff) is aimed at providing convenience and affordable toll rates to support cheaper logistics,” Minister Budi Karya Sumadi said at the State Palace.

Budi said the tariff reduction is actually being reviewed by related ministries. The government, he said, is assessing a number of schemes to push down the toll tariff, including extending the operatorship right as well as adjusting the vehicle class.

He pointed out, with the reduction of toll road tariffs, the logistic vehicle can save up to 50 per cent of the money to be paid when using the current toll road.  The tariff reduction may be applied in main toll roads that are being used by logistics companies such as the Trans Java toll road sections.

Vehicle Classes:

Vehicle Classes Type of Vehicle
Group ISedan, Jeep, Pick Up/small trucks and Bus
Group IITruck with 2 axles
Group IIITruck with 3 axles
Group IVTruck with 4 axles
Group VTruck with 5 axles
Group VITwo-wheel vehicles

 

Minister Hadimuldjono said the government is preparing a number of options to reduce toll tariffs, especially for logistic vehicles. The most likely option for the government to be implemented in the near future is the granting of toll road concession extension and tax holiday for the toll road developers.

He said adding the concession rights, toll road tariff could be lower by around Rp200 per kilometers.

“To reduce (the toll rates), we have to see the concession rights,” he said at the State Palace.

One example of toll roads, whose tariff could be cut is the 48-km Ngawai-Kertosono toll road section. The investment costs to develop the toll road section reached Rp 9.573 trillion. The basic tariff for the toll road is set at Rp 1,200 per km, or Rp 57,600 per 48 km, the interest rate of return (IRR) is set at 15.5 per cent, and a concession period of 35 years.

With the addition of the concession to 50 years or 15 years longer, the base tariff of this toll road could be reduced Rp 200 from the previous Rp 1,200 to Rp 1,000 per km. The tariff applies to other toll roads as well.

The toll tariffs are different for each type of vehicles. For Group II vehicles, the toll tariff is set 1.5 times of the basic tariff for Group I vehicle; Group III vehicles, the toll tariff is set twice the base tariff; Group IV vehicles tariff is set 2.5 times the basic rate, and Group V vehicles tariff is 3 times the basic tariff. The base rate of this toll road could fall to Rp800 per km if the concession period is more than 100 years, Basuki said.

In addition to extending the concession period of toll road ownership for investors, the government also examines the existence of clusters for the class of vehicles. If usually there are five classes of vehicles, it can be changed to only three classes of vehicles only. Group IV and V can downgrade to Group III vehicles.

Another way to push down the toll tariff is providing tax holiday to the toll road developers. The move is pending on the approval of the Finance Minister Sri Mulyani Indrawati.

Minister Hadimuljono explained the tax holiday is applied to all new toll roads that have been built and will be completed by the government. With these tax improvements, the logistics toll tariff could fall by around Rp 125 per km. This means that as for the Ngawai-Kertosono toll road case, the base tariff could fall from Rp 1,200 per km to only Rp 875 per km.

The current toll tariff ranges from Rp 750-1,500 per km. This rate has increased from a few years ago. However, the increase is fairly reasonable with the inflation rate of 5-8 percent per year from 2015-2018. With the cost of construction of highway construction is higher, then all the costs should be reflected in the tariff scheme and traffic volume.

Toll road operators are yet to make an official statement over the government’s plan to reduce the tariffs. However, some players are already voicing their agreement on certain conditions.

Director of toll road operator Astra Infra Wiwiek D. Santoso said it does not matter if the toll tariffs for logistic transportation vehicles are lowered. The important thing is that the government is consistent with the initial agreement that investors can still get the internal rate of return (IRR).

Based on the existing government rulings, toll road operators have the right to raise the toll tariffs every two years, to adjust with the inflation rate hike. Given the lower inflation rate environment, the regular tariff hikes could be applied. The ruling should also be amended.

Written by Staff Writer, edited by Roffie Kurniawan, email: roffien@theinsiderstories.com

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