Reduction in the power tariffs will help ease the pressure being faced by manufacturers, says president

By LYDIA NATHAN & NUR HAZIQAH A MALEK / Pic By MUHD AMIN NAHARUL

THE Federation of Malaysian Manufacturers (FMM) is backing the government’s intention to consider the proposal to reduce electricity tariffs, following the decline in prices of coal and natural gas in the global market.

FMM president Datuk Soh Thian Lai (picture) said a reduction in the power tariffs will help ease the pressure being faced by manufacturers amid concerns of an impending economic slowdown.

“With a reduction in energy cost, the costs to manufacture and deliver goods would also drop, leading to reduced costs for consumption,” he said in a statement yesterday.

Recently, spot coal cargo prices for exports from Australia’s Newcastle terminal have fallen by a quarter since the middle of 2018, dropping below RM366 (US$90) for the first time since 2017.

Subsequently, Prime Minister Tun Dr Mahathir Mohamad said on Monday that the government is considering reducing the electricity tariffs in view of the falling coal and gas prices.

Soh added that the federation is concerned with the impact of the current surcharge of 2.55 sen/kWh, which came into effect on March 1, 2019.

Last December, Tenaga Nasional Bhd announced that businesses would need to pay the extra surcharge from March till June 2019, citing higher fuel and generation costs as reasons.

This came after the government’s approval for the national utility company to continue implementing the imbalance cost pass-through (ICPT) mechanism for another six months from Jan 1 due to higher fuel and generation costs in the second half of last year.

As such, Soh said the federation hopes that the government will consider suspending any future surcharge for the next two ICPT review periods.

“The readjustment after the temporary suspension should be gradual. The accumulated surcharge accrued during the period should not be passed through all at once in the next ICPT review period,” he said.

Soh added that FMM is looking forward to engaging with the government to help sustain business competitiveness due to external factors, uncertainties and concurrent cost increases which have already been imposed on businesses.

“Despite some recent positive signals in the Malaysian economy, uncertainties over the global economy, in particular the ongoing trade tensions, continue to pose threats to the manufacturing sector, dampening business and consumer sentiments amid rising cost of living.

“In expectation of a challenging year ahead, FMM is hopeful that with the effective mechanisms being put in place to facilitate the industry, especially the small and medium enterprises to invest in energy efficiency initiatives, the industry will be able to mitigate the energy price volatility,” he said.

Meanwhile, Association of Water and Energy Research Malaysia president S Piarapakaran has urged the government to conduct proper engagement with stakeholders before finalising the move.

He said the situation warrants for an independent investigation and suggested to cancel the remaining direct negotiations as soon as possible.

“Our question remains the same. Why should all of us pay a higher electricity cost (tariff)?” he asked in a telephone interview with The Malaysian Reserve.

Piarapakaran said any drop in the electricity tariffs may only occur if gas prices drop below the base fuel cost, coupled with a drop in coal prices.

“However, any drop perceived at the moment still sees the coal price higher than the base fuel cost at US$75 per metric tonne.

“We are expecting it to come down. We will have to see the coal prices between April and June. A drop in coal prices will have to depend on the exchange rate for bigger savings,” he added.