DAP asks if sugar subsidy hike fattens politically-linked firms

By Shannon Teoh, Malaysian Insider, 29 January 2012

The global price of sugar has plunged over the past five months. - Reuters pic

KUALA LUMPUR, Jan 29 — The DAP questioned today if the government is handing over RM198 million this year to politically-connected companies after nearly tripling sugar subsidies despite global prices diving over the past five months. 

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri lsmail Sabri Yaakob was reported as saying on Friday that Putrajaya has increased subsidies from 20 sen to 54 sen per kilogramme of sugar to maintain the price at RM2.30 because the “global price of sugar is skyrocketing.” 

But DAP publicity chief Tony Pua said in a statement that after hitting a peak of US$29.47 (RM89.66) per hundred pounds in July 2011, the price of sugar has fallen every month to US$23.42 in December, a 20.5 per cent drop. 

“The question then is whether the 170 per cent increase in sugar subsidy or approximately RM198 million a year payable to MSM Holdings and Tradewinds, is in fact a thinly disguised attempt to fatten the profits of these two politically-connected companies. 

“The Minister must hence clarify why there was a need to increase subsidies when the global sugar price is falling while at the same time explain who are the real beneficiaries from the extra RM198 million of supposed ‘subsidy’,” the Petaling Jaya Utara MP said. 

Ismail had said that 99 per cent of Malaysia’s raw sugar is imported but Pua added today the market is monopolised by two refineries. 

Malayan Sugar Manufacturing Holdings is a 71 per cent subsidiary of Felda-related entities while Tradewinds Corporation is 43 per cent controlled by logistics tycoon Tan Sri Syed Mokhtar Al-Bukhary with another 20 per cent held by Felda Global Ventures Holdings.

Pua noted that even after taking into account the depreciation of the ringgit against the US Dollar by 7 per cent between July 2011 and December 2011, the global price of sugar would still have declined by 13.5 per cent in ringgit terms. 

“Therefore by maintaining sugar prices at RM2.30, the government should in actual fact have to subsidise less,” he said. 

But Ismail had said the Government would pay RM567mil for sugar subsidy this year compared to RM262.4mil last year. 

Sugar futures fell by 27 per cent last year, the most in a decade after a glut emerged following three consecutive annual shortages. 

But traders are expecting this year’s harvest to shrink, with prices rising as much as 12 per cent to US$27 per hundred pounds by the end of the year according to a poll of analyst and trader estimates by Bloomberg. 

The government last increased the price of sugar by 20 sen in May 2011 in a series of price hikes to basic necessities it said were necessary to keep a subsidy bill from ballooning. 

Since the Najib administration began cutting subsidies in January 2010, the price of sugar has increased by 58.6 per cent from RM1.45 per kg
.

Pemandu: Economy can absorb 5pc inflation

By Shannon Teoh

Malaysian Insider, June 23, 2011

 

Jala said the effects of subsidy cuts were minimal as they were only being made in “small doses”. — file pic

 

KUALA LUMPUR, June 23 — Putrajaya’s efficiency unit believes the economy can weather inflation of up to five per cent for up to three years, saying today subsidy cuts were implemented to ensure minimal impact amid a global rise in commodity prices.
Inflation spiked to three per cent in March and climbed to a two-year high of 3.3 per cent last month, with analysts predicting a further surge past four per cent due to subsidy cuts introduced this month. Most of the price jumps were for in the food and transport sectors.

The Performance Management and Delivery Unit (Pemandu) said that the central bank was consulted before deciding on subsidy cuts that began last year and concluded that “two to three years of between four to five per cent inflation is still okay.”

“The economy will still be okay and inflation will come back down to around three per cent after that,” said Minister in the Prime Minister’s Department Datuk Seri Idris Jala.

The Pemandu chief executive said that the main cause of inflation was the global rise of commodity prices, and the impact of the subsidy cuts were minimal as they were being implemented in “small doses and take into account pain points” for the public.

Seafood prices rose rapidly after diesel super-subsidies were pulled. — Picture by Choo Choy May

Putrajaya insists that it is forced to make cuts to a subsidy bill that would otherwise double to RM21 billion this year.

Most of the subsidies are for fuel, due to the disparity in prices for grades of petrol. RON95 petrol is RM1.90 a litre while premium grade RON97 is now RM2.80 a litre, pushing more motorists to use the lesser grade and adding to the subsidies needed to keep prices low.

The government has repeatedly explained that it must trim subsidies to ensure that the budget deficit, which hit a two-decade high of seven per cent in 2009, is reined in to a projected 5.4 per cent this year.

The Najib administration is expected to call a general election within the year but recent hikes to fuel, electricity and sugar prices have sparked public anger, leading to protests from groups such as fishermen, whose recent strike caused a spike in seafood prices.

A diesel super-subsidy was abolished on June 1 and those driving commercial vehicles now pay RM1.80 per litre of Euro 2 grade diesel instead of RM1.481 previously. The government said most of the cheap diesel was being smuggled to neighbouring countries and has started a crackdown to prevent subsidy leakages.

Commercial lorry operators have said this would force them to charge customers 18 per cent more.

Electricity tariffs were also recently increased by an average of seven per cent but Jala said today that the hikes only affected those who used more than 300 kilowatt-hours per month, which is less than a quarter of consumers.

Diesel subsidy cuts felt by housewives, restaurateurs

By Melissa Chi

Malaysian Insider, June 23, 2011

KUALA LUMPUR, June 23 — All through the Pudu wet market, one of the biggest in the Klang Valley, one can hear customers complaining that prices of goods are shooting up while sellers try to convince them that they are not profiting as well since the start of 2011.

This conversation is repeated across the country from Perlis to Sabah, reflecting the 2.9 per cent hike in the Consumer Price Index (CPI) for the first four months of 2011 but more since June when Putrajaya cut diesel subsidies for hauliers and trawlers, adding to the price of basic food items and other goods.

People buying fish at the Pudu wet market. Customers are complaining that prices of almost everything have gone up. — Picture by Choo Choy May

Restaurant owner Kak Mai told The Malaysian Insider that when prices of chicken and fish go up, she can’t raise the prices at her restaurant.

“I’ll just have to make less, what to do,” the 53-year-old said, pointing out that siakap fish (barramundi) has gone up from RM20 to RM24 per kg in the past few days, although she expects prices to come back down.

Fifty-six-year-old Mrs Cheong , who operates at a school canteen, was buying fish in bulk when approached by The Malaysian Insider.

“I sell at a school canteen, after signing the contract, the price is fixed and I cannot hike the price at all,” she said, adding that her profit went down from 20 per cent to 10 per cent in the past few weeks.

Until May 31, 2011, C2 trawler operators received a subsidy of 28,000l to 30,000l of diesel per month at RM1.25 per litre. Diesel super subsidies were removed for the C2 fishing trawlers and nine other logistic-related groups this month.

Those operating trawlers in the C2 category or 30 nautical miles offshore have been on strike since June 11 over the June 1 diesel price hike from RM1.25 to RM1.80 per litre.

Prime Minister Datuk Seri Najib Razak launched the Kedai Rakyat 1 Malaysia (KR1M) no-frills grocery shops yesterday in a move to mitigate rising prices of dry goods in the Klang Valley.

But the prices in the wet markets are subject to volatility.

Mohd Rosli Osman, 43, who was shopping for his family, pointed out that kerapu (grouper) went from RM9 to RM12 per kg and ikan bawal (pomfret) from RM8 to RM15.

Chan Soon Hoong, 48, who has been selling fish for 30 years, said the government should continue to provide the diesel subsidy.

“It costs twice as much now for almost anything,” he said.

Yuslizal, 42, another fishmonger at the market, agreed.

“The government should continue to subsidise. If the prices are too high, consumers don’t want to buy. Many of my customers complain about the price hike and they don’t know the reason why,” he said, adding that with less sales his profit margin has grown smaller, sometimes he just breaks even.

Rudi, 28, who has been operating at the market for three years, sells only freshwater fish such as pacu, rohu and tilapia.

He said the prices of his fish have also gone up as without the diesel subsidy transportation costs have gone up as well.

“Luckily I just sell freshwater fish because sea fish are way more expensive,” he said.

Mohd Erfan, 29, who sells chicken next to Rudi’s stall, said the price of chicken went up 30 sen continuously over the past three days.

As he was chopping up pieces of chicken, he explained that regular customers who run restaurants have cut down their orders from 10 birds to six per order.

He sells about 200kg to 250kg of chicken per day.

However, when The Malaysian Insider spoke to vegetable sellers, they said that there was no hike in their prices. Most of their vegetables come from Cameron Highlands.

The Najib administration has to take a razor to its subsidy bill despite surging inflation which hit a two-year high of 3.2 per cent in April as it attempts to trim the budget deficit down to 5.4 per cent after it hit a two-decade high of 7 per cent in 2009.

For the first four months of the year when the CPI averaged 2.9 per cent up, the three indices that rose highest was Transport (+ 4.6 per cent); Food and Non-Alcoholic Beverages (+ 4.5 per cent) and Housing, Water, Electricity, Gas and Other Fuels (+ 1.5 per cent).

Putrajaya said the June 1 subsidy cuts would save RM659.30 million, and had to be done due to the global increase in fuel prices since the start of 2011. Coincidentally, it brought down the market float price of RON97 premium petrol by 10 sen to RM2.80 a litre this month when global prices eased.

Petronas Forgoes RM133 Billion To Keep Gas Prices Low

June 22, 2011

PUTRAJAYA, June 22 (Bernama) -- Petronas should have saved almost RM133 billion between 1997 and end-March 2011 if gas prices were not fixed by the government to the power and non power generation industry.

Gas prices have been capped for almost 10 years at RM6.40 per million metric British thermal unit (mmBtU) since 1997 as an interim measure to alleviate the rakyat's burden.

The decision to cap prices had to be extended beyond the original schedule as the region faced the Asian financial crisis.

"It was an attempt to help with the economic recovery process," said Minister of Energy, Green Technology and Water Datuk Seri Peter Chin at a press conference here today to explain the gas subsidy to the power generation industry.

He said the decision to fix the price resulted in Petronas having to forego a certain percentage of its revenue based on the difference in gas prices being sold in the international market.

"The price cap on the industry is also to ensure the electricity tariff paid by the rakyat is kept low," he said.

The gas price was increased by RM3 per mmBtU to RM13.70 per mmBtU on June 1, resulting in an increase of 1.6 sen in electricity tariffs.

And, if gas prices are not adjusted by RM3 per mmBtU, every six months as proposed by the Performance Management and Delivery Unit or PEMANDU, it would result in Petronas forgoing another RM2 billion.

Chin reiterated that no funds were being transferred to either Independent Power Producers (IPPs) or Tenaga Nasional Bhd (TNB).

He said that the fuel cost for electricity generation by both TNB and IPPs was a pass-through component which would be reflected in the end-tariff to consumers.

"It is, however, subject to government approval," the minister said.

Gas accounts for 54.2 per cent of the main fuel used for electricity generation in the Peninsula and the generation cost increases in tandem with every increase in gas prices," he said.

If the gas to the power generation sector had been allowed to increase according to market price, he said the average electricity tariff would be increased by 16 sen per kilowatt hour (kWh) to 47.31 sen/kWh.

"It is still lower than Singapore's tariff of about 57.5 sen/kWh where the country's gas prices is floated in tandem with the international market," he said.

The international market price for gas is currently at about RM40.70 per mmBtU.

The government had earlier decided to gradually increase gas prices as it recognised the implications of the policy on future generations and to allow Petronas to redeploy its revenue for other activities such as exploration in new areas to ensure sustainable gas supply to the nation.

Chin also slammed opposition parties who were unable to grasp simple concepts such as the subsidy scheme and chose to misrepresent the details for political mileage.

Denying recent allegations that the gas subsidy was being handed out to benefit IPPs and TNB, the minister said:"I am surprised at such allegations...it is inaccurate and grossly misleading.

-- BERNAMA

Fuel Subsidy To Be Reviewed If Oil Prices Reach US$110-US$120 Per Barrel

May 26, 2011

PETALING JAYA, May 26 (Bernama) -- The government will review the fuel subsidy if oil prices reaches between US$110 and US$120 per barrel, says Deputy Finance Minister Datuk Donald Lim Siang Chai.

The government yesterday decided to maintain the prices of RON95 petrol, diesel and liquefied petroleum gas (LPG) for the time-being.

"We know at this juncture, a lot of other things have also increased, including food prices and housing. So the government decided not to increase (fuel prices," he told reporters after opening Standard Financial Planner Sdn Bhd's new office here Thursday.

Besides, the decision was also based on declining oil prices from US$110 per barrel, as of April, to just above US$100 per barrel, at present, Lim said, adding that the government was closely monitoring the crude oil market.

He said if oil prices continued to spiral, the government would have to spend more on subsidies, which in turn, could lead to a higher deficit and affect economic growth.

"When we (the government) planned the budget for this year, we were looking at oil prices hovering between US$85 and US$90 per barrel.

"Of course if it (oil price) drops below US$100 per barrel, then the government is not likely do anything because we can still find ways to overcome it. But if it goes beyond US$110, then we have to consider (some measures) as it could affect economic growth," Lim said.

Although, people can continue enjoying the fuel subsidy, Lim also advised then to be prudent.

Asked whether there could be an increase in electricity tariff rates, Lim said the National Economic Action Council would meet tomorrow to discuss and decide on the issue.

On Malaysia's economic outlook in the second quarter, Lim believed the country would be able to register a better growth of 4.6 per cent amid rising foreign direct investments.

-- BERNAMA

No Price Increase For RON95, Diesel And LPG

May 25, 2011 17:33 PM

PUTRAJAYA, May 25 (Bernama) -- In a move that will please many Malaysians, the government has decided to maintain the prices of RON95 petrol, diesel and liquefied petroleum gas for the time being.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the decision was made after an in-depth discussion on subsidy rationalisation at today's weekly cabinet meeting.

"The decision was made taking into consideration the interest of the people," he told a news conference at his ministry, here Wednesday.

The government would however continue to study the need for subsidy rationalisations in view of the increase in the prices of oil and gas in the global market.

Asked whether there was any discussion on the time frame for the prices to remain, Ismail Sabri said there was no discussion about time frame.

The price of RON95 petrol is now RM1.90 per litre and diesel at RM1.80 per litre. LPG is priced at RM1.90 per kg.

The last time the prices for these three items were adjusted was in December last year.

Ismail Sabri said the decision to retain the prices of the three items meant that the government had to bear fuel subsidy totalling RM18 billion.

Last year, the fuel subsidy was RM8.15 billion.

Ismail also called on the public not to listen to rumours being spread by the opposition.

"I saw in blogs, in Facebook postings, in pamphlets distributed by opposition parties, that the government will increase prices. Some say by 20 sen, 30 sen. These are all lies, not the truth," he said, expressing regret "because people seem to believe these lies."

"Believe in the government because the government listens to the views of the people. The government will consider every angle before making any decision.

"The decision today clearly shows that the government cares for the people. Enough of opposition's lies," he said.

Asked whether the decision had anything to do with the likelihood of a general election, Ismail said, "This has nothing to do with election."

"Subsidies have been in place for so long. If this is about the election, then we can increase (prices) only in certain months we want it to increase. No one knows when the election is going to be called," he said.

He also dismissed the notion that the decision was due to the pressure from the opposition.

"We don't listen to the opposition. Umno Youth has also been against (price increases). This is not because of the opposition," he said.

-- BERNAMA

Review Of Heavily Subsidised Gas Price Long Overdue

May 22, 2011 15:01 PM

A News Commentary By Siti Hawa Othman

KUALA LUMPUR, May 22 (Bernama) -- A long-overdue review of the heavily subsidised natural gas price is crucial as demand for cheap gas in Malaysia is far outstripping supply.

Analysts said that if this market-distorting situation is not corrected by the government soon, then Malaysia will run out of gas reserves which will jeopardise future generations.

As it is now, the government continues to subsidise gas by as much as 71-77 per cent, which means lost opportunities for the country and the economy not being cost efficient.

This is because the billions of ringgit used to heavily subsidise gas could have been used for socio-economic development projects such as public amenities, roads, schools and other services.

For gas alone, Petronas paid out a massive amount of subsidies amounting to RM131.3 billion between 1997 and 2010.

This being the case, there is a need to gradually move gas prices to reflect international market prices as gas prices in Malaysia are among the cheapest in the region and cheaper compared with alternative fuels.

As a result, a large number of consumers have shifted their consumption of energy from other fuels such as diesel, liquefied petroleum gas and fuel oil to natural gas.

This has resulted in an imbalance with demand outstripping supply at a rapid pace.

There is also a misconception among the people that Malaysia has lots of gas reserves to be used for power when the actual situation is that there is real concern over gas reserves as they are finite.

Malaysia is now getting 36 per cent of its natural gas supply outside Malaysia at a higher price which continues to increase, but sold to the power and non-power sectors and industries at highly reduced prices.

These price distortions to the economy which are taking a toll on the country's finances needs to be rectified soon by rationalising and reducing subsidies as the situation is increasingly untenable.

The local supply of natural gas is insufficient as demand has escalated 400 per cent over the past 10 years from 2000 for customers using less than 2.0 million standard cubic feet per day (mmscfd) and about 160 per cent for customers using more than 2.0 mmscfd while the country's gas reserves are fast depleting at an annual rate of 12 per cent.

The last gas price revision by the government was in March 2009, at a discount of 50 per cent, the prices ranged from RM15.35 per million British thermal units (mmBtu) to RM10.70 per mmBtu, with the obligation to review every six months but that did not happen.

Since the last revision, the price of medium fuel oil (MFO), a reference index from which gas is priced on, had risen over 100 per cent.

This has led the government to bear the cost of heavier subsidies as the price of energy continues to increase in global markets.

On the local scene, the power sector which has been subsidised since 1997, consumes about 55 per cent of the gas needs and a large part of the balance by the industry which had been subsidised since 2002.

The government has subsidised the price of gas to the power sector by as much as 77 per cent or RM10.70 per mmBtu and that to the industries at an average 73 per cent or between RM15.35 to RM11.05.

Based on a simple calculation, for every RM10, the government will have to subsidise between RM7.70 to RM7.30, which is already a burden, bearing in mind the fact that imported gas is bought at international market prices.

The Malaysian public and industries have been enjoying the benefits of subsidies for so long but the world scenario has changed and the days of cheap energy are gone.

From another perspective, Malaysia was subsidising the cost of products of other countries manufactured by their multinational companies based here.

The government will now have to adapt to strategies it knows best to sustain the economy and Malaysians must learn to accept changes and ride the global economic storm to be at the forefront of the competition.

Like it or not, oil and gas prices have increased and the subsidies which have become a burden to the government are very much due for a relook.

Industries have benefitted immensely enjoying double subsidies in the form of cheap gas and subsidised electricity, while receiving other government incentives.

Having relied on cheap gas for their production, there is no incentive for companies to adopt and adapt to new technologies and find new ways to become efficient.

But a gradual removal of subsidies is expected to induce industries to seek more efficient technologies for their processes.

It is understood that some of the industry players do not mind the market rates but expect any move towards that end to be undertaken in a gradual manner.

Since 1997, the government had spent RM131 billion in oil and gas subsidies and the amount is increasing since the gas usage gets bigger while higher MFO prices had caused the situation to be not sustainable in the long run.

As of now, Malaysia is getting supply of natural gas from the Natuna field in Indonesia, the Malaysia-Thailand Joint Development Area (JDA) and also from Vietnam.

Malaysia's share of gas supply from Vietnam is almost exhausted, which means an additional burden on the government to look for new sources.

It is understood that Petronas would also be importing liquefied petroleum gas (LPG) by 2012 to cater to increasing demand, which is rather costly at about RM40 per mmBtu.

The people have to dispel the misconception that gas is always there and readily available.

In reality, Malaysia is a small player and the country's oil and gas reserves are small.

If gas continues to be subsidised, then Malaysia is not optimising its resources when the reserves should be kept for future generations.

Ideally, the price of gas should be at market rates which would then attract other potential companies to import gas and liberalise the market.

By spurring the gas trade, players could import cheaper gas from abroad compared to the current situation, where players are not willing to come onboard as they would not be making any money competing against subsidised gas.

It is understood that Petronas will have its regasification plant ready by 2012 whereby other companies could import LNG and regasify to sell to the industries.

Malaysia, eventually, will attract investors who can add higher value to the gas industry and generate greater income and spur the economy in the process.

-- BERNAMA

IPP subsidies under review

By Lee Wei Lian

Malaysian Insider, May 19, 2011

 

 

KUALA LUMPUR, May 19 — The controversial gas subsidies for independent power producers (IPPs) are under review but no decision has been made yet, said Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah today.
“We have done a discussion and study under the Ministry of Energy, Green Technology and Water, EPU (Economic Planning Unit) and myself,” Husni told reporters at the sidelines of the 15th Malaysia Banking Summit today when asked if the subsidies will be relooked at. “We have to wait for the decision.”

The issue of gas subsidies is also a controversial one as the prime beneficiaries are seen to be the IPPs, many of which are highly profitable and perceived to be controlled by politically-favoured parties.
DAP recently urged the Najib administration to first cut billion-ringgit subsidies for IPPs rather than burden the people with subsidy cuts on essential items

“Remove the big opium of gas subsidies that can save tens of billions of ringgit annually before dealing with the opiate for the masses that only save hundreds of millions of ringgit,” said DAP secretary general Lim Guan Eng in a statement recently.

“Why should the masses and the ordinary 27 million Malaysians be made to bear these price rises when the few big corporate giants in the IPPs do not suffer a single cent in gas subsidies cuts?”

DAP publicity chief Tony Pua added that the government must take action against “fat crony companies” like IPPs if it wished to reduce subsidy burden, as last year’s five-in-one subsidy cut would only save RM750 million while a 20 per cent cut in subsidies to IPPs would save RM3.6 billion.

The Petaling Jaya MP said while there was no doubt that the cost would be passed on to consumers, unfair contracts signed between the government the IPPs meant that electricity tariffs should be at least 26 per cent cheaper based on comparison to international rates

He said that based on Petronas annual reports, gas subsidies granted to IPPs amounted to RM8.1 billion in 2008.

Price hike for RON95, LPG and sugar

STAR, 3 December 2010

PUTRAJAYA: The prices for RON95 petrol and diesel will increase by 5sen per litre at midnight (12.01am Dec 4) while the prices of liquified petroleum gas (LPG) and sugar will be up by 5sen and 20sen per kg respectively.

RON95 would be raised to RM1.90 per litre from the current RM1.85 while price of diesel would be retailed at RM1.80 per litre. LPG and sugar will cost RM1.90 and RM2.10 per kg respectively.

Minister in the Prime Minister’s Department Datuk Seri Idris Jala Idris said the price hike was the second wave of the subsidy rationalisation programme.

Prices of RON95 and diesel went up by 5sen per litre while sugar and LPG were raised by 25sen and RM10 on July 16 for the first wave of the programme.

That resulted in total savings of RM779mil. This time around, Idris said the savings is expected to be RM1.18bil.

Idris said the savings would be channelled towards improving urban transportation network, rural basic infrastructure and roads, education and efforts to combat crime.

He added that the increase was very minimal and should not hurt the people.

“I think it is fair to the rakyat. I believe people will be able to accept it,” he told a media briefing on the second wave of subsidy rationalisation here Friday.

Idris said the Consumer Price Index could be contained in view of the low increase and declined to disclose the amount of subsidy the government would have to pay for the items.

New fuel, sugar prices

Motorists flocking to a petrol station to fill their tanks hours before the new prices for RON 95 and diesel are to be implemented. — NST picture by Aizuddin Saad

NST, 16 July 2010

KUALA LUMPUR: As the first step towards gradual subsidy rationalisation, the government announced yesterday a reduction in the subsidies for fuel, specifically petrol, diesel and liquefied petroleum gas (LPG), as well as sugar.

Subsidies for RON 95 and diesel will be reduced by five sen per litre and LPG by
10 sen per kg. RON 97 petrol will no longer be subsidised but will be subject to a managed float, with the price determined by an automatic pricing mechanism.
The new price for RON 95 is RM1.85 per litre compared with RM1.80 per litre

previously. For RON 97, which accounts for 13 per cent of sales of petrol and diesel, the new price starts at RM2.10 per litre and will be reviewed monthly.

Diesel is now priced at RM1.75 per litre against RM1.70 per litre previously.

For LPG (cooking gas), the new prices are RM18.50 for 10kg (RM17.50 previously),
RM22.20 for 12kg (RM21 previously) and RM25.90 for 14kg (RM24.50 previously).

For sugar, the price has been adjusted upward by 25 sen per kg to RM1.90 per
kg (previously RM1.65 per kg). These new prices took effect at midnight.

“The government has made a difficult but bold decision,” a statement from the Prime Minister’s Office said yesterday.

“By choosing to implement these modest subsidy reforms, we have taken a

crucial step in the right direction towards meeting our commitment to reduce the
fiscal deficit, without overburdening the Malaysian people.

“These measures are a demonstration of our fiscal responsibility. They will
enhance Malaysia’s financial stability, while also protecting the rakyat.”
In Alor Star, Prime Minister Datuk Seri Najib Razak said the subsidy cuts would help the government reduce the fiscal deficit while the reduced subsidies
meant that more funds could be channelled towards national development for the people.

“We have many programmes under the National Key Result Areas and the National Key Economic Areas, which will be announced soon.

“I assure you the subsidy cuts are minimal and will not be a burden to the people. We will use the savings derived from the subsidy cuts to meet the needs of the people, especially in the rural areas,” he said after opening the Kuala Kedah Umno division delegates’ conference.

Even with these subsidy cuts, the government will still spend an estimated RM7.82 billion on fuel and sugar subsidies this year. The prices of fuel and sugar will continue to be among the lowest in the region.

By way of a comparison, RON 95 petrol is priced at the equivalent of RM4.12 a litre in Thailand and RM2.48 a litre in Indonesia. This subsidy rationalisation will, according to estimates, allow Malaysia to reduce government expenditure
by more than RM750 million this year.

Economists contacted by Reuters news agency generally agreed with the government’s move to cut subsidies. Enrico Tanuwidjaja of OSK-DMG in Singapore said the subsidy cuts suggested that the government was quite positive about the growth outlook.

“I think the amount itself is relatively small in the sense that people’s purchasing power may not be that eroded and may not be that inflationary.

“This is a good way to consolidate the huge negative in the fiscal position.
“Let’s see how consistent they are moving forward — that is the important part. They can afford to do so if looking at the oil prices now.

“Definitely, this is a point moving forward that they are going to embark on a more prudent fiscal approach.”

Irvin Seah of DBS Bank said the move signalled the government’s readiness to really go ahead with its rationalisation plan, especially with fuel subsidies.

“There will be some mild impact to headline inflation and we can expect to see, overall, Malaysian prices going up. The petrol price hike is an added bonus to lowering the fiscal deficit.

“We have, anyway, expected the fiscal deficit to fall this year on strong gross domestic product growth.” Federation of Malaysian Consumers Associations president Datuk Marimuthu Nadason urged consumers to accept the small price increases, saying they would not have a huge impact.

He urged traders not to take advantage of the new sugar price to charge consumers more for their food products. Marimuthu said the reduction in subsidies would help to reduce the government’s spending and channel its resources to other areas to uplift society.

“The government will now be able to provide improved education and health services and facilities to the public.”

Treasury Disputes Idris Jala's Data

By Asrul Hadi Abdullah Sani
Malaysian Insider, June 08, 2010

KUALA LUMPUR, June 8 — The Ministry of Finance disputed today findings made by Datuk Idris Jala and his Performance Management and Delivery Unit (Pemandu) in his argument for immediate subsidy cuts, in a major embarrassment for the minister charged with overseeing the administration’s key performance indicators (KPIs).

Treasury officers briefed Barisan Nasional (BN) backbenchers in Parliament today and indicated Idris (picture), the former Malaysia Airlines boss hailed as a hero for turning around the national carrier, had overstated his case for subsidy cuts with flawed statistics.

Using Pemandu findings Idris had predicted Malaysia could be bankrupt by 2019 if it did not begin to cut subsidies for petrol, electricity, food and other staples, which he said cost the country RM74 billion last year.

Prime Minister Datuk Seri Najib Razak also moved today to quell fears raised by Idris that Malaysia would one day go the way of Greece and Iceland and become a bankrupt nation by pointing out the government was taking steps to ensure that the country’s debts would be reduced.

In a briefing for the BN Backbenchers Club (BNBBC), Treasury officers said the country’s total subsidy bill was only RM18.6 billion, and not RM74 billion as stated by Idris, for 2009.

According to Pemandu figures, the country’s total subsidy was RM74 billion, which is equivalent to RM12,900 per household.

Pemandu said the government subsidises RM23.5 billion for fuel, RM4.6 billion for infrastructure, RM3.1 billion for food and RM41.8 billion for social welfare (health, education and higher education).

But the Finance Ministry said today the country’s total subsidy was RM18.6 billion or equivalent to RM3,246 per household.

It said that RM7.1 billion was spent for fuel, RM0.8 billion for infrastructure, RM2.9 billion for food and RM7.8 billion for social welfare.

A copy of the briefing notes was made available to The Malaysian Insider.

The Treasury briefing is set to further alienate Idris as Najib has distanced himself from the former corporate captain’s warning and said that his estimations were merely based on Pemandu’s studies.

Former premier Tun Dr Mahathir Mohamad has also ridiculed the minister in the Prime Minister’s Department, saying that Idris was exaggerating.

The Malaysian Insider understands that Idris has come under fire from Cabinet colleagues because his remarks had undermined Najib’s government.

Pemandu is also holding a briefing for the BNBBC tonight after many BN leaders had expressed dismay over Idris’s bankruptcy remarks.

The briefing is aimed at explaining its findings and receiving feedback from members of the BNBBC.

Lawmakers from both BN and Pakatan Rakyat (PR) have agreed that an immediate implementation of any subsidy cuts would spell political suicide for the Najib administration with the next general election within the next 34 months.

Najib has also stressed that the public would have the final say on whether expensive subsidies would be cut.

Shahrir: Don’t give petrol as prize

STAR, September 8, 2008

JOHOR BARU: Private companies have been requested to stop giving out petrol as a prize as it is subsidised by the Government.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said although he understood the rationale behind the prize, petrol was not a suitable gift when companies were trying to promote their products.

“I hope that oil and car companies will stop giving out free petrol as each litre of petrol is subsidised with money from taxpayers,” he told reporters after handing out bubur lambuk at Masjid Jamek in Bandar Baru Uda yesterday.

Shahrir distributing bubur lambuk at Masjid Jamek on Sunday.

Shahrir said he had already informed his officers to pass the message to the relevant companies and that a “reasonable” deadline would be given.

“Those that have already announced their contests can finish them or they may be sued for misrepresentation, but must desist after that.

“Other companies should not attempt to offer such prizes in future,” he said.

Shahrir pointed out that action could also be taken against the companies as petrol was under the list of controlled goods.

“We probably won’t take immediate action, as these companies probably are not doing it intentionally,” he said.

More incentives for bus operators this Raya

STAR, September 4, 2008

PUTRAJAYA: The Government is providing 9,000 litres of subsidised diesel for each additional bus the operators are willing to put on the road, to avert a shortage for the Hari Raya rush across the country.

The Cabinet decided to offer this incentive following fears that school and factory bus operators might refuse to lease out their buses, if they were not offered a diesel subsidy.

To ward off such a crisis, an additional 2,000 express buses can be expected to be put on the roads for the balik kampung exodus this Hari Raya.

This optimism takes into account the Government’s offer of a diesel subsidy of 9,000 litres for each additional express bus used between Sept 15 and Oct 15.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said the decision would cost the Government between RM100mil and RM150mil in subsidy.

“This is in addition to the 30% surcharge and discounted toll charges to ensure Malaysians have enough transportation to get home,” he told reporters after attending the launch of Bernama’s web television.

Prior to the announcement, bus operators had said that the 30% surcharge allowed by the Government for the Hari Raya season was inadequate for them to lease more buses.

Shahrir added that Entrepreneur and Cooperative Development Minister Datuk Noh Omar would give more details on the Cabinet decision.

Asked if there would be a fuel price revision this month, Shahrir said he hoped that there would be a Hari Raya gift, as the world oil price had dropped recently.

Budget airline, Firefly, said there would be extra return flights from Subang to Kota Baru on Sept 29-30 and Oct 3-6, while AirAsia had also arranged for extra return flights on other domestic routes.

Govt offers 2,000 permits and subsidised diesel to avert balik kampung travel crisis

STAR, Thursday September 4, 2008

PETALING JAYA: It is still uncertain whether all of the 2,000 temporary bus permits will be taken up despite the Government’s latest diesel subsidy offer to bus operators.

Pan Malaysian Bus Operators Association president Datuk Ashfar Ali said he could not comment on whether school, factory and charter bus operators would lease out their buses, even with the subsidised diesel allocation.

Bus rush: An official of a bus company at the Hentian Putra bus terminal in Kuala Lumpur making a ‘time out’ sign with his hands as he tries to control the crowd rushing to buy bus tickets yesterday to balik kampung during the coming Hari Raya festive period. — AZMAN GHANI / The Star

“Some are willing to take on shorter routes while others are not willing at all,” he said.

He said he would have to study the details of the move announced by Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad before commenting further.

Some 1,900 temporary licences were issued to school, factory and charter buses last year to cope with the Hari Raya crowd, but this year, there had been few takers so far despite the Entrepreneur and Cooperative Development Minister Datuk Noh Omar setting aside 2,000 temporary permits.

Today, Noh is meeting with bus operators in Kuala Lumpur to resolve this looming crisis that could leave tens of thousands of people who travel by bus back to their hometowns to celebrate the Hari Raya Aidilfitri in a quandary.

Bus operators had earlier said that it was “not economically feasible” to lease school, factory and charter buses, as the costs of operations were high.

Ashfar, prior to government's announcment assured there would be 300 to 400 extra buses to cater to the balik kampung crowd, but it was insufficient to meet the demand.

“Usually, we have about 21% extra buses to fill in for buses that are undergoing maintenance. We roll out all of them during festive periods,” said Ashfar.

It is learnt that many express bus operators were previously unhappy that they are only receiving between 4,000 and 5,000 litres of subsidised diesel per bus on average.