Government Makes U-turns!

Putrajaya has rescinded its decision to remove the ceiling price for chicken effective July 2022. Also, the electricity surcharge has been deferred to December 2022. This came after inflation concerns were raised. A free float of chicken and chicken egg prices will escalate cost of living. So does electricity surcharges.

The ceiling prices for chicken and chicken eggs were implemented on Feb 5 and subsequently extended to June 30. Currently, the ceiling price for standard chicken is set at RM8.90 per kg in Peninsular Malaysia.

Ismail Sabri also announced that the government has decided not to increase the water and electricity tariffs in Peninsular Malaysia.

There will be a rebate of two sen/kWh for domestic consumers in the peninsula while a minimum surcharge of 3.70 sen/kWh for commercial and industrial consumers will remain unchanged. The government was reportedly due to review the electricity tariff, which is due on July 1.

Tenaga Nasional Berhad (TNB) was pressured by the rising generation cost due to a combination of surging energy demand, fuel supply disruptions, as well as the growing shortages of oil, gas, and coal globally, which have caused global energy prices to skyrocket.

At the end of last year, the price of coal surged to US$200 (RM846) per tonne, up from around US$50 per tonne in mid-2020; by the end of May 2022, coal prices had risen to US$434 per tonne, with coal accounting for 59 percent of Malaysia’s key source of electricity generation.

TNB Fuel Services sources coal from Indonesia, Australia, South Africa, and Russia, but Indonesia accounts for approximately 65 percent of TNB’s coal requirements.

Why must TNB raise tariffs? Its pre-tax profit for the first quarter of 2022 was RM0.9 billion. Annualise that, it works out to over RM3.6 billion for the year. Assuming further escalation of cost, profit could be reduced to RM2 billion. Is that too “small”? If TNB raises tariffs because analysts expect that, it will only make management look good. Could TNB reduce costs especially if the management group earns over RM 11m a year? A rise in tariff is a rise in inflation for most items. And the poor can hardly afford that! U-turns are most welcome in this case.

Source: https://commons.wikimedia.org

References:

Govt makes U-turn on chicken ceiling price, new one to be revealed soon, Malaysiakini, June 24, 2022

Consumers to pay more for electricity due to steep rise in fuel cost, Isabelle Leong (www.thevibes.com), 15 June 2022

Electricity tariff hike: 7% increase for some, targeted subsidy for others, Isabelle Leong, The Vibes, 17 June 2022