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Press Statement

by Lim Guan Eng

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(Melaka, Thursday) : Domestic Trade and Consumer Affairs Minister Datuk Shafie Apdal had given the clearest indication of a rise in fuel prices next year when he said that the Government might not be able to continue giving fuel subsidies following the rise in record fuel prices to more than US$88 per barrel this week. In view of the high international oil price and other factors.

Whilst it may be economically unrealistic to expect any government to perpetually subsidize petroleum and gas without limit, it is socially unrealistic to expect the poor to survive without any assistance once the subsidies are removed. What is economically justifiable can not be socially justifiable if the poor are not given any financial assistance to counter inflationary impact from removal of gas subsidies.

However, the government can only abolish the yearly RM 27 billion fuel and gas subsidies to allow market pricing by distributing the RM 27 billion savings to the poor and Malaysians earning less than RM 3,00 per month to reduce their financial burden of inflation. With the rise of international price of oil to more than US$88 per barrel, the government can no longer sustain the subsidies paid which also benefits the wealthy.

The government would have to pay RM 14 billion in subsidies with Petronas paying an extra RM 13 billion as gas subsidies. For financial year ended March 31 2007, Petronas' gas subsidy totaled RM15.6 billion, up 9.1% from RM14.3 billion in 2006. The RM 15.6 billion was given to TNB with RM 5 billion, IPPs RM 6.7 billion and non-power sector (small-industries, residential. and commercial users) RM 3.9 billion.

Is it in the national interest that IPPs should benefit RM 6.7 billion in gas subsidies in 2007 and earn huge profits without returning any benefits back to Malaysians? Petronas' cumulative subsidy since 1997 amount to RM 58.2 billion, of which RM 48.8 billion was to the power sector and RM 9.4 billion to the non-power sector. Subsidies are part of socio-economic measures meant to help the poor. Something is very wrong when subsidies are offered to huge companies to further pad their extra-ordinary profits.

In view of the high costs from smuggling and loss of efficiency from fuel subsidies, DAP would only support the abolition of subsidies if the savings from the RM 27 billion spent on subsidies last year is shared with working Malaysians earning less than RM 3,000 per month. This would enable every working Malaysian and senior Malaysian who is above 60 years of age whose income is below RM 3,000 a month to get at least RM 3,000 a year to deal with rising inflation following the removal of subsidies. Better the RM 27 billion in savings from subsidies is shared with 27 million ordinary Malaysians of 9 million working Malaysians who earn less than RM 3,000 a month than parceled out to wealthy Malaysians and companies like the IPPs.

The time has come for Malaysians to take direct benefit from such oil revenues when Malaysians do not see how the RM 53.3 billion in taxes and dividends contributed by Petronas to the government this year is spent. There is no reason why Malaysians can not benefit directly from oil revenues when Malaysia is an oil exporter and an oil importer like Singapore without a single drop of oil can afford to distribute S$2,500 every year to poor and middle-class families.