Local Manufacturers Appeal for Staggered Gas Price Hikes

By Rupa Damodaran

LOCAL manufacturers are appealing to the government that any increase in gas prices be implemented on a staggered basis.

Rising energy prices have raised concerns in the local manufacturing sector, which consumes half of the electricity produced in the country.

Federation of Malaysian Manufacturers (FMM) president Tan Sri Yong Poh Kon said the federation has held discussions with the Economic Planning Unit and the International Trade and Industry Ministry on the gas price and is seeking that any hike be in a staggered form over a period of time.

“There are industries which require more supply of gas for their processes and we have proposed that some of the gas used to generate electricity be channelled to the manufacturers.

“A portion of the additional price paid can be channelled back to the power producers to pay for the alternative to gas, that is coal,” he said.

By doing so, the power producers will generate electricity from coal without additional costs and the manufacturers will also be able to get their gas supply necessary for their operations.

National utility company Tenaga Nasional Bhd last raised electricity prices by 12 per cent in June 2006, which was the first done in nine years.

As at March 2007, only 637 manufacturers are customers of Gas Malaysia Sdn Bhd.

“We understand that gas prices have to move up. But in the case of gas, the manufacturing sector only consumes less than a quarter,” he said.

FMM said the manufacturing sector uses only 11.6 per cent of natural gas compared with the power generation sector’s 62.5 per cent, making up only five per cent of total gas production in Malaysia.

The ceramics and oleochemical industries are expected to be the most hard hit from the hike in prices, he added.

These sectors along with petrochemicals, rubber gloves, iron and steel are among the heavy users of natural gas.

An increase in natural gas pricing will hit manufacturing at least twice – directly through natural gas and indirectly through electricity tariffs – as the power sector is expected to pass through these costs to consumers, in particular industrial consumers.

(c) 2007 New Straits Times. Provided by ProQuest Information and Learning. All rights Reserved.