M'sians to pay more for power from next year
Govt hikes charges as it tries to put its subsidy rationalisation plan back on track
By pauline ng in Kuala Lumpur
Published December 03, 2013
MALAYSIANS will pay much higher electricity charges from next year - domestic tariffs will rise by 15 per cent and commercial and industrial tariffs by an average of 17 per cent - as the country tries to put its long-delayed subsidy rationalisation programme back on track after this year's general election.
Special industrial tariff users such as steel companies will be harder hit, by 19 per cent or nearly a fifth more.
The announcement, which came amid earlier hints of higher prices to come, was made by Energy Minister Maximus Ongkili in parliament yesterday.
But Mr Ongkili gave his assurance that the tariff hike would not affect those who use less than 300 kWj a month, which by state-owned utility Tenaga Nasional's calculations amounts to 4.6 million users or 71 per cent of all households.
Following the 4.99 sen (1.9 Singapore cents) hike in the peninsula, electricity rates will rise to an average 38.53 sen per kWj - still 9 per cent lower than the actual cost of 42 sen kWj. The five sen increase in tariff for Sabah and Labuan amounts to a 17 per cent hike.
Although higher prices are inevitable given that Prime Minister Najib Razak had largely put them on hold for two to three years pending the general election in May, the backlash could be considerable as a significant proportion of businesses and the public already struggle with everyday costs despite inflation being a benign 2.8-3 per cent. Few take the official rate seriously however and many grapple with debt.
At 83 per cent of gross domestic product (GDP), Malaysia's household debt is one of the highest in the region.
The implementation of a minimum wage has also added to business costs, and many expect that cost increases will be largely passed on to consumers.
One beneficiary of the power increase will be Tenaga, which was up 0.3 per cent before its shares were suspended to facilitate the announcement.
In September, Mr Najib had bumped up the price of petrol and diesel by nearly 11 per cent as he sought to convince international investors of his administration's seriousness in tackling Malaysia's huge subsidy bill as well as fiscal reforms to the economy.
But the measure was met with lukewarm enthusiasm with rating agencies viewing it as relatively minor and cautioning more had to be done to ensure Malaysia's sovereign ratings remain intact.
While Mr Najib, who is also the finance minister, has gradually trimmed the budget deficit to 3.5 per cent of GDP this year, he also needs to deal with a large public debt. At about 54 per cent of GDP - just under the self-imposed 55 per cent - it has added to Malaysia's fiscal vulnerability.
To further broaden the tax base, a goods and services tax of 6 per cent is scheduled to be implemented in April 2015.
Malaysia's fuel subsidies have been growing exponentially. The RM38 billion allocated this year - about RM15 billion for electricity - gobbles up nearly a fifth of the country's operating expenditure compared to less than 4 per cent a decade ago.
Fuel prices are expected to see at least another increase next year, given that at RM2.10 per litre (RON95 petrol) they are still below market prices and one of the lowest in the region.
Consumers are likely to fork out more for gas as Tenaga said domestic gas prices had risen from RM13.70 per MMBtu (one million British Thermal Unit) to RM15.20 per MMBtu and was part of the reason for the power tariff hike.
http://www.businesstimes.com.sg/premium/malaysia/msians-pay-more-power-next-year-20131203