Government increases fuel prices to cut spiralling cost of subsidies
Petrol and diesel prices go up by 78 sen and RM1 per litre respectively effective today, the highest increase in these fuel prices ever.
Prime Minister Datuk Seri Abdullah Ahmad Badawi, in announcing the price increase yesterday, said the new price for petrol at the pump would be RM2.70 per litre (a 40.6 per cent jump) and diesel, RM2.58 per litre (a whopping 63.3 per cent jump).
Abdullah told a news conference at his office that the Cabinet had agreed on a cash rebate for Malaysian owners of private cars and motorcycles to ease the burden of the rise in the fuel prices.
“A cash rebate of RM625 per year will be given to owners of private cars of engine capacity of up to 2,000cc and pick-up trucks and jeeps of up to 2,500cc.
“Owners of private motorcycles of engine capacity of up to 250cc will be paid a cash rebate of RM150 per year,” he said.
The prime minister said the cash rebate would be given to the owners of the cars and motorcycles when they paid or renewed their road tax.
He said the cash rebate would cover cars and motorcycles for which the road tax was renewable between last March 31 and April 1, adding the rebate would be given in the form of money order at post offices nationwide beginning this July 1.
The increase in prices is the highest ever. On Feb 28 2006, the prices of petrol and diesel went up by 30 sen, with petrol costing RM1.92 per litre and diesel RM1.58 per litre.
The announcement yesterday is part of the government’s new fuel subsidy scheme mechanism which seeks to reduce the fuel subsidy amounting to an annual RM53 billion.
The government’s move to float the fuel price in accordance with the global market price still makes Malaysia one of the countries with low prices for fuel in this region.
The new prices of petrol and diesel are far lower than the RM5.20 and RM4.22 for the fuels, respectively, in Singapore which has floated the prices as well.
The prime minister said the Cabinet had decided that the owners of cars and motorcycles excluded from the cash-rebate category would have their vehicle road tax reduced according to the following rate effective last June 1:
• Owners of private petrol and diesel vehicles with engine capacity of more than 2,000cc will have the road tax reduced by RM200.
• Owners of private motorcycles of engine capacity of more than 250cc will have the road tax reduced by RM50, subject to a minimum of RM2.
Abdullah also said that there would be no change in the prices of liquefied petroleum gas (LPG) and natural gas for vehicles (NGV), with LPG at RM1.75 per kg and NGV at 63.5 sen per litre.
He also announced the streamlining of the diesel subsidy for approved transportation companies, vessel transportation companies and fishermen.
“Currently, transportation operators, fishermen and vessel owners enjoy different subsidies for diesel. Fishermen buy diesel for RM1 per litre and vessel owners buy at RM1.20 per litre.
“The Cabinet has agreed to streamline the price of diesel (for these categories of consumers) at RM1.43 per litre effective June 5 2008.
This price would not jeopardise transportation companies under the fleet card system because they will continue to enjoy the petrol and diesel subsidies at this price,” he said.
He said the government had agreed to pay in cash a portion of the difference in the old and new prices to fishermen and vessel owners, as follows:
• Payment of RM200 cash monthly to every owner and crew of Malaysian-owned vessels registered with the Fisheries Department.
• Payment of incentives to vessel owners at the rate of 10 sen per kg of fish landed by approved fishing vessels at fish landing centres in the country.
“The payments will be managed by the Malaysian Fisheries Development Authority.
The Cabinet has also decided that operators of river passenger boats will be given cash payment of 10 sen per litre based on an approved quota,” he said.
Abdullah also announced that beginning July 1 2008, the prices of gas supplied by Petronas in Peninsular Malaysia will be changed as follows:
• For the electricity sector, the price will be increased from RM6.40 per mmBtu (Million British Thermal Units) to RM14.31 per mmBtu.
• For industrial sector consumers using less than 2 mmscfd (Million Standard Cubic Feet Per Day), the price fixed by Gas Malaysia Sdn Bhd (GMSB) will be raised from RM9.40 per mmBtu to RM24.54 per mmBtu.
• For industrial sector consumers using more than 2 mmscfd, the price of gas supplied by Petronas will be raised from RM11.32 per mmBtu to RM32.56 per mmBtu.
“However, special assistance will be given to consumers of GMSB gas, i.e. for the category of small and medium enterprises. These consumers will enjoy a lower gas tariff rate.
“In line with the sustainable energy policy, Petronas will reduce the subsidy for the electricity sector progressively in line with the current market price, up to the 15th year, when the level reaches the market price,” he said.
At the same time, he said, the subsidy for the industrial sector would be reduced progressively in line with the market price, up to the 11th year, when the level reaches the market price.
Abdullah said that in announcing the new electricity tariff, Tenaga Nasional Bhd (TNB) would have to bear the increase in the price of coal in the global market.
He said that with the restructuring of the gas subsidy and increase in the price of coal, the government had approved a new electricity tariff structure to enable TNB absorb the fuel cost for gas and coal.
The new tariff structure, effective July 1 2008, would apply to all domestic, commercial and industrial consumers in Peninsular Malaysia only and a new structure would be announced soon for those in Sabah and Sarawak, he said.
In line with the government’s desire to safeguard as much as possible the welfare of the low- and medium-income group, the new electricity tariff structure would not affect consumers who use less than 200 kilowatt hour (kwh) per month, with the electricity bill estimated to be RM43.60.
“This means that 59 per cent of households in Peninsular Malaysia will pay the same amount for electricity so long as they maintain their level of usage,” he said.
Commercial and industrial users will see a rise of 26 per cent in their electricity bills, he added.
“However, retailers, shopkeepers and small restaurant operators as well as industrial users such as cottage enterprises using not more than 200 kwh a month will only see a rise of 18 per cent,” he said.
Touching on the contribution of independent power producers (IPPs) and palm oil producers towards easing the financial burden on the people, Abdullah said the IPPs were expected to generate more profits from market returns.
“In line with the restructuring of the gas subsidy, the government has decided to implement provisions of the Windfall Profit Levy Act 1998 on IPPs in garnering their contribution to meeting the rise in the cost of fuel to generate electricity.
“The quantum of the levy is 30 per cent of the excess return on assets at the threshold value exceeding nine per cent based on their audited accounts,” he said.
The prime minister said palm oil producers had recorded increased profits following the high price for palm oil in the global market.
As such, he said, the Cabinet had agreed to abolish the Cooking Oil Stabilisation Scheme (COSS) effective July 1 2008 and implement provisions of the Windfall Profit Levy Act 1998 on palm oil producers.
The levy would be imposed at the stage of the millers:
• For Sabah and Sarawak, it is 7.5 per cent for every tonne of crude palm oil (CPO) which exceeds RM2,000.
• For Peninsular Malaysia, it is 15 per cent for every tonne of CPO which exceeds RM2,000.