By Tony Pua, Member of Parliament, Petaling Jaya Utara
18 May 2011
Muhyiddin must not pull the wool over the people’s eyes by cutting simple subsidies for the man-on-the-street but refuses to take action against large subsidies feed fat crony companies.
There is little to dispute on the fact that subsidies cannot last forever and our Malaysian subsidy system needs to be restructured. According to our Deputy Prime Minister, Muhyiddin Yassin, the subsidy burden is expected to increase from RM10.32 billion to RM20.58 billion this year, of which approximately RM18 billion goes to fuel-related subsidy.
As a result, Muhyiddin has hinted strongly that retail fuel prices, particularly that for RON95 used by majority of Malaysians, will be raised sooner rather than later. This comes hot on the heels of the most recent 20 sen increase in sugar prices, the 4th such increase in 18 months, or a total of 58.6% increase over the period.
However, what the Deputy Prime Minister has failed to explain to the Malaysia public is the overwhelming bulk of the projected RM18 billion of fuel-related subsidies is given to companies with lucrative concessions earning billions of ringgit in profits annually.
The current crude oil prices for 2011, nearing US$100 per barrel is comparable to 2008 when the average price was approximately US$92 per barrel. In 2008, based on Petronas annual reports, gas subsidy granted to Independent Power Producers (IPPs) amounted to RM8.1 billion, while Tenaga Nasional Berhad took RM5.7 billion.
While these IPPs will no doubt argue that these subsidies are “transferred” to the end consumers, as a result of unfair contracts signed by the Malaysian governments in favour of these IPPs, our electricity prices should be at least 26% cheaper based on international comparisons. This means that the heavy subsidies for these IPPs only served to mask the astronomical profits made by these corporations.
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.
Raising the prices of essential goods and services enjoyed by all Malaysians can only reduce the country’s subsidy bill marginally. For example, the 5-in-1 subsidy cut last year would only result in savings amounting to RM750 million, while a 20% cut in subsidies to IPPs alone will save RM3.6 billion.
We completely support the call by UMNO Youth Chief, Khairy Jamaluddin to cease further subsidy cuts in the light of the increased burden of rising food prices.
Khairy is absolutely correct to point out that “the cost of fulfilling government guidelines for economic activities was RM17 billion per year”, which is “21 times the savings from subsidy cuts for sugar and oil-based goods in July 2010 and 14.4 times for the same cuts in December last year”.
We agree that the Government should do more instead to improve government efficiency and accountability to help reduce expenditure and trim the budget deficit.