By Yow Hong Chieh | May 18, 2011
The Malaysian Insider

KUALA LUMPUR, May 18 – The Najib administration should first cut billion-ringgit subsidies for independent power producers (IPPs) rather than burden the people with subsidy cuts on essential items, DAP has said.

DAP secretary-general Lim Guan Eng said the government would only spur inflation by removing the diesel super subsidy before cutting “big opium” gas subsidies worth RM19 billion for IPPs and commercial power sectors.

“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,” he said in a statement today.

“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?”

Lim (picture), who is also Penang chief minister, added that the government should also be dealing with “the bigger opium” of RM28 billion lost annually to corruption, estimated to have cost the nation up to US$100 billion (RM303.06 billion) since the 1980s.

Prime Minister Datuk Seri Najib Razak said yesterday that fuel subsidies are “like opium” to the Malaysian economy and will have to be reduced gradually to bring the budget deficit under control.

He said the government had budgeted for fuel subsidies to cost the economy RM11 billion this year but that the estimate had soared to around RM18 billion because of high global crude oil prices.

“Subsidies as a whole are like opium. Once you take opium it’s hard to kick the bad habit. Once you provide subsidies, it’s hard to take them away without some political cost,” he told an audience at Oxford University’s Centre for Islamic Studies.

DAP publicity chief Tony Pua said similarly said 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.

He pointed out that in 2008, based on Petronas’ annual reports, gas subsidies granted to IPPs amounted to RM8.1 billion, while Tenaga Nasional Bhd (TNB) took RM5.7 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.

“This means that the heavy subsidies for these IPPs only served to mask the astronomical profits made by these corporations,” Pua said in a statement today.

“Hence the Government’s continued attempt to reduce subsidies for the man-on-the-street and its continued refusal to restructure unfair contracts with concessionaires such as the IPPs proves only that the Government does not prioritize the interest of the people ahead of its profitable cronies.”

He added that he supported Umno Youth chief Khairy Jamaluddin’s call for government to cease further subsidy cuts in light of rising inflation and to increase accountability to help trim the budget deficit.