Tackling Logistics Costs: Indonesia to Cut Toll Road Ticket Prices?
The Indonesian government is studying the possibility of cutting toll road prices for specific trucks, hence companies engaged in transportation logistics would be the key beneficiaries. The study comes after stakeholders have complained about the expensive prices that are charged by toll road operators (most of which are state-controlled companies). Indonesian President Joko Widodo said a price cut of up to 30 percent is possible. A cheaper price would improve the competitiveness in the logistics sector.
As a lower price for toll roads would impact negatively on the earnings of the toll road operators, the government has several options to reward the operator. For example, the government can offer a tax holiday or extend the concession period by 10-15 years.
Gemilang Tarigan, General Chairman of the Indonesian Truck Operators Association (in Indonesian: Asosiasi Pengusaha Truk Indonesia, or Aptrindo), welcomes the plan as it would surely lead to lower logistics costs in Indonesia, hence prices for domestic transportation services can decline as well although not too significantly. Meanwhile, Achmad Ridwan Tento, Secretary General at the Indonesia Maritime, Logistics & Transportation Watch (IMLOW), said the plan would impact positively on the logistics business environment in Indonesia.
Herry Trisaputra Zuna, Head of the Indonesia Toll Road Authority (in Indonesian: Badan Pengatur Jalan Tol, or BPJT), said the possible lower toll road prices would only be applied on a selection of toll roads, particularly new ones that connect big cities.
However, Indonesian Toll Road Association (ATI) Chairman Fatchur Rochman said he is concerned that toll road operators' lower short-term income (due to the cut in toll road ticket prices) may disturb the companies' cash flow and therefore jeopardize their ability to invest in new toll road projects. This could in fact jeopardize the toll road development program within the government's infrastructure development program. Under the leadership of Widodo the Indonesian government unveiled an ambitious toll road development program with several state-owned companies being appointed the "agents of development". Considering the central government does not have enough funds to finance all toll roads, while the private sector is hesitant to join in these projects, several state-controlled construction companies have been tasked to develop the nation's toll road network.
However, after several new toll roads became operational over the past couple of years there emerged criticism that very high rates were charged to the user of the toll road. Hence, several toll roads are ignored by transportation companies as they prefer to take a different, much more crowded, route to avoid paying a high price. Good examples are the Mojokerto-Kertosono section or the Bekasi-Cawang-Kampung Melayu section.
Operators argue, however, that high prices for a toll road ticket are justified considering the development of the toll road is becoming increasingly expensive (especially the land acquisition process). It is estimated that for each kilometer of toll road construction it requires IDR 100 billion (approx. USD $7.3 million) in investment, a calculation that not even includes the purchase of the land.
Lower toll road tariffs for logistics could be implemented as soon as March 2018 depending on the results of the government's research.