Since the last tariff hike in 2006, citizens and corporations have undertaken steps to conserve electricity through the use of energy-saving products. They know that the hike will not be the last.
The hike in rate has nothing to do with mismanagement by the Government of the country’s energy resources or Tenaga Malaysia Berhad’s craving to soar its profit margin sky high.
The fact is the price of fuel and gas went up. This is a global issue and no country in the world can do anything much to control it. We have to be realistic and not allow opposition politicians to spray their poisonous sermon to hoodwink the people into believing that the current Government is inefficient and heartless.
Even if the rule the country, they will do the same and if they tell otherwise, they are lying and we are fool to believe them.
Coming back to the energy saving by the people and corporations, it was quoted in the STAR that there have been a sharp increase in customer orders for energy efficiency solutions.
Energy efficiency solutions provider Focus Dynamics Technologies Bhd chief executive officer Kee Twuan Tee said since the last quarter of 2009 already saw a 20% increase in customer orders for energy efficiency solutions.
“Customers were mainly hotels and owners of commercial buildings.Our customers are starting to talk about increasing revenue not just from sales, but also from cost savings. For a typical commercial building, the electricity bill amounts to about RM500,000 to RM700,000. Seventy per cent of this goes to air-conditioning, while the remainder is for lighting and heating,” Kee said.
He said energy efficiency solution products could reduce electricity bills by some 20%, with the return on investments on the solution over three years.
Corporations have also undertaken energy saving measures as part of their strategy to reduce their dependence on electricity.
Reported in the Edge Daily, Top Glove Bhd said the overall impact o natural gas and electricity city price increase is less than 1% of its total manufacturing cost. In addition, the company had started using biomass since 2005 to avoid depending entirely on natural gas.
Malaysia Steel Works (KL) Bhd CEO was quoted as saying that the new tariff would increase its electricity cost by approximately 10.5%. However, the company believed it could partially reduce its electricity cost by making adjustments.
In short, a lot of companies have adopted energy efficiency solutions to counter the high electricity cost.
What if the Government disallow TNB from increasing the tariff. Malaysia Insider in its reported dated May 26 said:
The Najib administration’s decision to defer subsidy cuts could have far-reaching implications for Malaysia’s long-term productivity and competitiveness, economists said today.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the money used to keep pump prices at current levels could have been put to “more productive use”, such as bolstering Malaysia’s technology and innovation base to make the country more competitive.
He said this was particularly true of investments in research and development, training and education, infrastructure as well as social welfare, which would have also boosted earnings for lower income groups.
“The opportunity cost can be high, especially if the next best use of the additional funds could have generated much higher multiplier effects,” he told The Malaysian Insider.
Yeah said the short-term benefits in price stability gained from delaying fuel price hikes may create a false sense of economic security, and stressed that fuel subsidy cuts would have helped reduce consumption and encourage energy conservation and efficiency.
He also pointed out that rising fuel consumption would make Malaysia more vulnerable to future energy shocks should the price of crude oil continue to climb, given that the country is set to become a net importer of oil within the next decade, he said.
“Biting the bullet earlier would mean less pain in the future... The (subsidy) cuts when our backs are to the wall will be very much sharper,” he said.
Yeah added that there was a risk that unpredictable subsidy cuts and greater government borrowings arising from the growing budget deficit would impede market confidence and derail the economy, which was still dependent on foreign investment.
Kenanga Investment Bank Bhd economist Wan Suhaimi Saidi similarly said that the government’s reluctance to slash fuel subsidies would only lead to a widening budget deficit that could eventually hurt Malaysia’s sovereign credit rating and the cost of future borrowings.
“I don’t think they’re going to achieve 5.4 (per cent budget deficit target). You have to be realistic. I’m not going to be surprised if it reaches six per cent,” he said.
He said he was unsure Malaysia, as a net oil-exporting nation, would be able to offset the rising cost of fuel subsidies despite additional revenue from higher crude oil prices.
“In spite of the fact that the government may earn some extra revenue, it may not be enough to stem the rising deficit,” he said.
“How much can the government stomach?”
Jupiter Securities research head Pong Teng Siew, who felt delaying fuel subsidy cuts was “not the right choice”, said it was critical that the government not reduce the quality of public services to pay for the higher than expected subsidy bill.
“We hope they won’t shift the allocation from essential services to non-essential ones,” he said.
“That will affect the basic social functions that the government provides for everyone in the country.”
He said it would be better if the government instead improved public sector efficiency through increased computerisation and by cutting bloated procurements rather than reducing the scope of education and medical services.
Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said yesterday the government will not cut subsidies for RON95 petrol, diesel and liquefied petroleum gas (LPG) for now as it was “concerned for the people’s welfare”.
But Deputy Finance Minister Donald Lim announced today that fuel subsidies would be put under review if global crude oil prices reach US$110 to US$120 (RM330 – RM360) per barrel due to ballooning petroleum subsidies, expected to more than double from the budgeted RM8 billion to RM18 billion this year.
Investment research firm AmResearch has estimated that Putrajaya is now subsidising at least 90 sen per litre of RON95 versus the intended 30 sen per litre after crude oil prices surged to US$99 per barrel from US$79 per barrel last year, matching the US$100 per barrel recorded in 2008.
Crude oil prices are expected to trend upwards, with JP Morgan recently revising its 2011 estimates for Brent Crude and West Texas Intermediate (WTI) crude to US$120 and US$109.50 respectively.
The government also announced today that the National Economic Council will decide tomorrow whether to revise the electricity tariff after being instructed by Cabinet to deliberate on the matter.”
But does this mean that prices of goods will not increase? No. The prices of goods will continue to increase whether on not the electricity tariff is increased or not. Even before the minimal increase, prices of consumer goods have gone up. Other factors, including raw materials, higher labour charges and others are contributing factor that pushed manufacturers to hike the prices. This, at the end of the day, is passed to the consumers.
Any economist worth his salt can tell you that the cost of living will go up as the economy progress.
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