Friday, June 20, 2008

Removing fuel subsidies... and the obscene sin
Effective 00:00hr June 5 , petrol price will go up by 78 sen, or by 40.6%, jumping from RM1.92 per litre to RM2.70.

Concurrently, the price of diesel will increase by a whopping 63.3%, from RM1.58 per litre to RM2.58. See PMO Press Statement here.

This means since Abdullah Badawi became an elected Prime Minister in 2004, petrol has gone up by 97.1%, while diesel increased by a whopping 231%.

You may want to ask this: Will this round of fuel increase help to reduce the financial burden of the poor?


When it rains it pours for the consumers. In tandem to the fuel price increase, Tenaga Nasional Bhd will be raising electricity rates by 20% for homes, and 26% for business users.


The tariff rise will affect about 41% of the households in the country.

The sweeteners

As sweetener for the latest price surge, vehicles below 2000cc will receive an annual rebate of RM625 to compensate for 800 litres of fuel used under the new price.

On the other hand, road tax for vehicles above 2,000cc will be reduced by RM200. For motorbikes above 250cc, their road tax will be slashed by RM50, but a minimum rate of RM2 road tax will be maintained.

Meanwhile, diesel subsidy for fishermen and vessel owners have been fixed at RM1.43 per litre. Previously fishermen bought diesel at RM1 per litre while vessel owners paid RM1.20 per litre.

Why spare the IPPs?

If the Abdullah Administration thought it right in removing fuel subsidies meant for the business and individual consumers, then it should do the same to remove indirect but guaranteed subsidies to the Independent Power Producers (IPPs).

Under the lopsided terms of the Power Production Agreements (PPAs), the IPPs are shielded from the rising cost of fuel.

The five first generation IPPs all use natural gas as their feedstock and PETRONAS sells gas to the IPPs at RM6.40 per million British Thermal Units (mmBTU).

That pales in comparison with the current market price of around RM35/mmBTU.

PETRONAS has paid out RM58.2 billion in gas subsidies since 1997, out of which, RM26.7 billion has gone into the pockets of the IPPs.

This is obscene sin.

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