Friday, May 28, 2010

Subsidy No More?

UALA LUMPUR, May 27 (Reuters) - Malaysia will hike petrol,
gas and toll highway rates under a five-year plan to cut
subsidies, if to proposals made by PEMANDU, a body advising the
government on how to cut subsidies are enacted.

The government has yet to make a decision on the planned
subsidy cuts and may not do so for some months.

Subsidy cuts proposed involving 12 items:



* Petrol prices to be increased 15 sen in June-Dec 2010, then
10 sen hikes every six months between Jan 2011-Dec 2012 and by a
lesser amount in following years.

* Petrol prices seen at

- 2.16 ringgit in 2011

- 2.20 ringgit in 2012

- 2.34 ringgit in 2013

- 2.52 ringgit in 2014

- 2.60 ringgit in 2015.

* The forecast for crude oil in 2011 is $73.06 per barrel and
for 2013-2015 in the region of $79.41-94.52.



* Renegotiation with PLUS highways in 2010 and with
LDP Highways by 2013. Propose that all concession
agreements would proceed without subsidies, resulting in a toll
hike of between 10-67 percent for 2010.



* Gas price is increased by a fixed rate of RM3/MMBTU every
six months from initial increase for power sector and non-power

* Gas price increase of RM3/MMBTU every six months
corresponds to an increase in electricity tariff of 1.6 sen/kWh
every six months.

* Electricity tariff for lifeline consumers (in 2010, less
than 200 kWh) would not be increased. About 56 percent of
households will not be affected in 2010.

* Consumers with a monthly bill of 20 ringgit and below will
continue to get free electricity until Dec 2010.

* Strategic industries will be protected initially.



* Estimated impact on inflation:

- A 5 percent increase in petrol prices would result in a 0.4
percentaage points rise in the consumer price index.

- A 10 percent increase would cause the CPI to go up by 0.82
percentage points. Fuel represents 7.7 percent of the CPI basket.



* In 2010, government will save about 3.0 billion ringgit. In
2011, 14 billion ringgit, 21 billion rgt in 2012, 29.5 billion
ringgit in 2013 and 35 billion in 2014.

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