Fuel, sugar prices go up

Matt Siow 7/15/2010 0

Prices of sugar, petrol, LPG, diesel to go up Friday (The Star)
Thursday July 15, 2010

Subsidy removed for RON 97 petrol

KUALA LUMPUR: From Friday, the subsidies for sugar, petrol, liquefied petroleum gas and diesel will be cut as part of the gradual subsidy rationalisation programme, according to a statement from the Prime Minister’s office on Thursday.

The price of sugar will go up 25sen to RM1.75 per kg; LPG will go up 10sen to RM1.85 per kg; petrol RON95 will be up 5sen to RM1.85 per litre and diesel will be up 5sen to RM1.75 per litre.

RON 97 will no longer be subsidised. It will be subjected to a managed float, where the price will be determined by the automatic pricing mechanism, the statement said.

The details of these changes are now available on the PMO and PEMANDU websites, at: www.pmo.gov.my and www.pemandu.gov.my.

On May 27, Minister in the Prime Minister’s Department Datuk Seri Idris Jala had said that Malaysia would be bankrupt by 2019 if it did not cut subsidies and rein in borrowings.

He had said that Malaysia's debt would rise to 100% of GDP by 2019 from the current 54% if it did not cut subsidies.

Meanwhile, In ALOR SETAR, Prime Minister Datuk Seri Najib Tun Razak said that when implementing the subsidy rationalisation plan, the Government would seek not to burden the people.

He said the rationalisation move was necessary to reduce Government expenditure and strengthen the financial position of the country.

“It will help reduce the fiscal deficit so that world and local markets will have more confidence in the national economy,” he told newsmen after opening the Kuala Kedah Umno division meeting here on Thursday.

He added that the Government was reviewing all types of subsidies.

First round of cuts (The Star)

PETALING JAYA: The Govern-ment has begun its first round of a gradual subsidy rationalisation programme, promising it would have minimal impact on families.

Describing the cuts as part of a “difficult but bold” decision to reduce fiscal deficit, the Government said it would still have to spend an estimated RM7.8bil on fuel and sugar subsidies this year.

Thus, effective today, prices of petrol, diesel, liquefied petroleum gas (LPG) and sugar have increased following a reduction of the subsidy.

Sugar is revised to an additional 25 sen per kg to RM1.90. LPG is up 10 sen per kg to RM1.85.

Petrol RON 95, RON 97 and diesel have gone up by five sen per liter. For RON 97, the Government has decided to withdraw the subsidy later and subject it to a managed float, where the price will be determined by an automatic pricing mechanism.

“This subsidy rationalisation will, according to estimates, allow Malaysia to reduce Government expenditure by more than RM750mil this year,” a statement from the Prime Minister’s Office said yesterday.

Details of the changes are available on the websites of the Prime Minister’s Office and Pemandu.

The Government also said the “long-needed” economic reforms would help Malaysia maintain the strong growth it had achieved to become a developed and high-income nation.

“We have begun a planned and fair reform of a subsidy regime that for too long has been ineffective in helping those who need it most and, over time, has become a barrier to Malaysia’s progress,” the statement read.

The prices of fuel and sugar in Malaysia would still be among the lowest in the region, it said.

It also said the Government made the decision about the subsidies following robust consultations with the people, citing the thousands of Malaysians who took part in policy labs and Open Day.

“As with subsidy reform, the Budget, the Government Transformation Programme and the National Key Economic Areas, the Government has made a determined effort to engage the public, listen and learn, and then act in the best interest of the nation,” it said.

Although Malaysia had weathered the global recession well, the Government said the country could not achieve its ambition to be a high-income nation by simply managing through a crisis.

“As the Government has consistently said over recent months, we must also implement subsidy reforms that will remove distortions in the marketplace and enable us to better target our resources on those most in need, and on investments that will provide lasting benefits for Malaysians.”

It assured that the savings from the reforms would allow for resources to be better channelled for families, communities and business growth.

“Measures such as the 1Malaysia clinics, the 1Malaysia mobile clinics, as well as the scholarships for all 9A+ and deserving students – specifically those who have done well, but come from lower income families – are made possible by such reforms,” it said.

There were three main concerns which led to the subsidy rationalisation: wrong beneficiaries, wastage and abuse.

The Government also said that businesses used twice as much subsidised sugar than households, while owners of luxury cars enjoyed cheap fuel although they could afford unsubsidised prices.

Metzelder says: I am plesantly surprised that government implemented changes where Barisan seen to ready and confidence are high as the all-time high approval rating of PM.

The rollback in subsidies is not expected to cause a major spike in inflation and the impact on overall consumption will be minimal but the Government should ensure that profiteering does not become rampant.

More importantly, they said the Government should enforce stringent measures so that food prices were kept in check to protect the interest of the lower and middle-income earners.

CIMB Investment Bank Bhd economic research head Lee Heng Guie said the five sen or 2.8% rise in the price of RON95 would have a minimal impact on inflation.

“RON 95 has a 6.5% weightage to the overall consumer price index - and the 2.8% increase translates to a 0.2% overall impact to the index, so that’s minimal,” he said.


To save Malaysia from bankrupt by 2019, subsidies rationalisation is unavoidable but how far Government would help to mitigate the effect on middle income people? The wage trend in Malaysia recorded only an annual 2.6 per cent growth during the past 10 years, compared to the escalating cost of living during the same period. It explains why almost 34 per cent of about 1.3 million workers earn less than RM700 a month, below the poverty line of RM 720 per month — a point emphasised by the Minister of Human Resources, Datuk Dr. S. Subramaniam, recently.

But prices of goods are increasing at approx. level of 5% annually.

While lower income can continue receive the benefits outline by Government, the middle incomes only can far cry with escalating living costs especially in urban areas.

What industry players said:
The Malaysian Muslim Restaurant Operators Association (Presma) will not raise prices of food and drinks despite the revision in the prices of sugar and fuel following subsidy cuts.

Prices as usual at mamak shops (The Star)
Sunday July 18, 2010

KUALA LUMPUR: It’s business as usual at mamak restaurants without any change in price.

The Muslim Restaurant Operators Association of Malaysia (Presma) said its members will not raise the prices of food and drinks despite the revision in the prices of sugar and fuel due to subsidy cuts.

“I have advised our members to retain the prices for the time being but if suppliers raise the prices of foodstuff and ingredients, then we may have to increase our prices,” Presma president Noorul Hassan Saul Hameed told Bernama.

This means the prices of items like roti canai and teh tarik will remain for a while.

He said that depending on location and ingredients, teh tarik costs between 80 sen and RM1.50 a glass, a piece of roti canai between 80 sen and RM1 and fried mee between RM3 and RM5 a plate.

Asked whether the prices of drinks with less sugar content would be reduced, he said the association would study the mechanism.

Meanwhile, Federation of Ma­­laysia Hawkers Association president Lee Teong Chwee said a price hike in hawker food was unavoidable, as prices of ingredients and operating costs had increased.

Besides fuel, sugar and liquefied petroleum gas, Lee said the prices of vegetables, pork and chicken had also increased in the past few months.

The Federation of Chinese As­­sociations of Malaysia said the Government should ensure that savings from subsidy cuts were be used for plans and programmes to benefit the people.

Its president Tan Sri Pheng Yin Huah also urged the Government to look into the needs of the lower and middle-income earners.

“The Government should ensure the people do not suffer from the subsidy cuts,” he said

He also said that it should also come out with incentives for entrepreneurs and businessmen affected by the subsidy cuts.

Consumer Raj Kamar, 42, from Gemas said he was shocked to find that his favourite teh tarik now cost 20 sen more after the Government announced the subsidy cuts on Thursday.

Another consumer Jenny Goh, 33, said the Government should check on stall operators who increased their price excessively.

“I understand that their operating costs have gone up due to the subsidies cut.

“But it is unacceptable if there is a 20-sen increase on a cup of coffee just because the price of sugar went up by 25 sen a kilo,” she said.

Food, drinks prices to remain stable: Ismail Sabri (The Star)
By Mazwin Nik Anis

PUTRAJAYA: Drinks, kuihs and other food items will remain “sweet” in taste and its prices as some 500,000 restaurant, coffeeshop and foodstall operators and manufacturers have agreed to maintain charges despite recent sugar price increase.

The pledge was made by more than 30 associations whose members - despite being affected by the 25sen per kilo increase after the government’s decision to cut subsidies - were willing to absorb the hike instead of passing it to consumers.

Among associations that have agreed to maintain the prices were the Malaysian Indian Restaurant Owners Association (Primas), the Malaysian Indian Muslim Restaurant Operators Association (Presma), Malaysia-Singapore Coffee Shop Propritors General Association and the Malay Traders and Petty Traders Association.

Domestic Trade, Consumerism and Co-operatives Minister Datuk Seri Ismail Sabri said food operators understood the government’s rationale in restructuring subsidies which had resulted in an increase in the prices of sugar and petrol.

“As a sign of support and understanding, they have agreed not to increase the prices of food and drinks and absorb the higher cost of sugar instead.

“Furthermore, the increase is small and they can afford not to pass it to consumers.

“The same pledge is also given by large food and drinks manufacturers. I would like to thank all concerned for their support. This news will certainly be of relief to consumers who are concerned they need to pay more for food and drinks,” he told reporters after a dialogue with food and drinks operators and manufacturers on Monday.

Ismail Sabri said according to a study made on prices of prepared foods following subsidy rationalisation, the increase were only between 0.2% and 2%, citing an example where the price of fried mee, instead of costing RM4 per plate would now cost RM4.01 or 0.3% higher while teh tarik cost one sen more or RM1.21 while Air Sirap Bandung cost two sen more at RM1.52.

The minister hope that the respective associations would relay the message to their members, adding the ministry’s enforcement team would also monitor should there be an increase.

“While we may not be able to take action against those who increase the prices, we will nevertheless advice them, because they will be at the losing end if they do so as consumers will certainly opt for shops which offer reasonably-priced food items,” he said.

Transport players to study impact first before deciding on price hike (The Star)
Saturday July 17, 2010

PETALING JAYA: Transport industry players will study the impact of the fuel subsidy cut before they decide whether they should raise prices.

However, they supported the gradual reduction in subsidies which would otherwise be a burden to the Government in the long run.

Pan Malaysia Lorry Owners’ Association president Er Sui See said the people should get rid of the “subsidy mentality” as it would not benefit the country in the long run.

“Our petrol and diesel prices are still cheaper than neighbouring countries like Singapore,” he added.

Er said his association would not increase fees as its members would absorb the fuel price rise.

“We have already asked our members not to increase their fees,” he added.

Federation of Malaysian School Bus Operators Association president Tan Chui Leng said he would call for a meeting to discuss the diesel subsidy cut.

“I have received a lot of phone calls from our members asking whether the school bus diesel subsidy will be cut as well.

“We are still in the dark, so I will have to check with the relevant authorities before advising our members on the next move,” he said, adding that the school bus operators paid RM1.43 for a litre of diesel before the Government’s announcement on Thursday.

Tan said there was a possibility that school bus charges would be increased if the subsidy was reduced.

“We will make a small adjustment. We will not charge excessive fares that will burden the parents,” he added.

Container Hauliers Association of Malaysia honorary secretary-general Jimmy Loh said the association would study the situation before deciding whether to make any adjustments.

“We will call for a meeting soon. We will discuss the impact of the (subsidy) cuts before making any decision,” he said.

Loh said the association understood the Government’s reasons for the reductions, adding that it would work together with the Government on improving the country’s economy.

All must do their part. We have to change our lifestyle; reducing sugar intake, use more often public transports and other neccessary changes. It is good to hear that Najib has dismissed the proposed new Parliament building in Putrajaya. In fact, no state should be putting up state assembly buildings when elected representatives only meet a few times a year.

The billions of ringgit removed from subsidising sugar and fuel, we are told, will be used for education and health care.

Other areas include security, development of skills and new energy technologies. Not to forget, scholarships for all SPM achievers with 9A+ or better, regardless of their race. This scholarship move is unprecedented.