Economics

Gov’t to announce power tariff hike on Monday

By Kit

May 27, 2011

Malaysiakini | May 27, 11

The National Economic Council (NEC) has today approved an increase in the electricity tariff but details will only be announced on Monday.

The NEC convened today in Putrajaya at a meeting involving several cabinet ministers chaired by Prime Minister Najib Abdul Razak. Energy, Green Technology and Water Minister Peter Chin is expected to hold a press conference on Monday to deliver a formal announcement.

In recent weeks, cabinet ministers have been repeatedly telling the public to brace for an electricity tariff rise as the government embarks on a subsidy-slashing exercise.

On Wednesday, the cabinet deferred plans to hike up fuel prices, which critics argue cannot be justified unless the federal government first embarks on an austerity drive.

Over the past 18 months, the government has pushed up sugar prices by 58 percent and allowed RON97 grade petrol to hit a record high of RM2.90 per litre.

Coupled with the ‘5-in-1 hike’ on July 15 involving RON95, RON97, diesel, liquified petroleum gas and sugar prices, inflationary pressure is mounting.

Mustapa: Increase will be gradual

The withdrawal of subsidies is part of the federal established Performance Management and Delivery Unit’s (Pemandu) subsidy rationalisation plan.

According to the plan, electricity tariffs will be raised by 2.4 sen/kWh initially, followed by 1.6 sen/kWh hike every six months spread over the next five years until July 2014.

Currently, the average electricity tariff stands at 31.3 sen/kWh.

Tenaga Nasional Bhd has frozen its base tariff rate since 2009 and complains that currently the tariff covers only coal cost of up to US$85 against the prevailing coal price estimated at US$117 per tonne, reported StarBizWeek.

Meanwhile, International Trade and Industry Minister Mustapa Mohamed said that Malaysia’s industries must be prepared to face the electricity tariff hikes but stressed that it would be done gradually.

“The government needs to be financially strong. Therefore, the increase is necessary and some industries are expected to feel the pinch once it (tariff) goes up.

“The surge in power costs would, however, be done in stages. This is to enable industry players to be prepared,” Mustapa told reporters in Shah Alam, reported Star Online.

Tenaga is one of the top 10 gainers in Bursa Malaysia today. It closed at RM6.58 per share, an increase of 4 percent.

[More to follow]