Increase in electricity bill to hamper SMEs recovery

Most SMEs are already operating on a razor thin margin and are struggling to find their footing amid the pandemic 

by S BIRRUNTHA / Pic by HUSSEIN SHAHARUDDIN

THE increase in electricity tariffs for commercial and industrial consumers starting tomorrow is feared to affect the recovery of small and medium enterprises (SMEs), and result in price increase to consumers. 

SMEs Association (Samenta) chairman Datuk William Ng said the hike, described as a “surcharge” under the Imbalance Cost PassThrough mechanism is going to hamper the recovery of the SMEs. 

He added that if the hike must be allowed, then the association would urge the Cabinet to consider a far lower quantum of increment without affecting Tenaga Nasional Bhd’s (TNB) continued profitability or it’s “resilient performance”. 

“While we have urged and will continue to urge our members to refrain from raising prices despite this steep hike in electricity bill and costs of raw materials, we must also understand that most SMEs are already operating on a razor thin margin and are struggling to find their footing amid the pandemic. 

“If the proposed hike continues as planned, it will be difficult, if not impossible, for businesses to absorb the increased costs without passing them partially to the consumers, just as TNB is doing,” Ng said in a statement yesterday. 

He noted that according to the Energy Commission and TNB’s data, more than 1.6 million commercial and industrial users will be paying between 11.8% and 18.4% more for electricity from tomorrow. 

“For most SMEs, especially those in the manufacturing sector, electricity is the second or third largest cost factor, behind raw materials and labour costs. “A hike of up 18.4% in utilities bills for a business that’s running at sub-10% margin could mean a reduction of 20% to 40% of its profit, and could even mean a difference between making and losing money,” he said. 

Ng added that while the association can understand the need for periodic adjustments in prices, the quantum or the timing of it cannot be accepted, especially since TNB reported a 9.6% and 4.6% jump in revenue and earnings, respectively, for the nine months ending Sept 30, 2021. 

“TNB’s CEO Datuk Baharin Din was quoted as saying that ‘demand is expected to improve in the coming months and into next year (2022) as more economic activities open for businesses.’ 

“As such by TNB’s own admission, the national utility company will be doing better in coming months, and there are no reasons for the steep hike, especially since it is aspiring to cut down its reliance on coal in its portfolio from 45% in 2021 to 10% by 2035, with the costs of coal stock chiefly blamed for this decision for the steep hike,” he noted. 

Additionally, Ng said Samenta also urges Prime Minister Datuk Seri Ismail Sabri Yaakob to step in to rescue the country’s ailing SMEs as he has promised to.