BN deluding themselves and deceiving the people if they say there will be only 0.27% inflation following power tariff hikes, ending free electricity to 900,000 consumers using less than RM20 monthly by end 2011 and withdrawal of diesel subsidy

Media statement by Lim Guan Eng in Kuala Lumpur on Wednesday, 1^st June 2011:

BN deluding themselves and deceiving the people if they say there will only be 0.27% inflation following power tariff hikes, ending free electricity to 900,000 consumers using less than RM 20 monthly by end 2011 and withdrawal of diesel subsidy. How can the government state that inflation will rise by only 0.27 % when everyone feels the price increase in basic household commodities is higher than 0.27%?

The withdrawal of diesel subsidies has led to the announcement by transport operators of the rise in transport costs and prices of fishes soaring because fishermen find it too expensive to put their boats out to sea. For BN to state that inflation will only rise by 0.27% is not reflective of reality and is typical of rich men quoting meaningless statistics to justify wrong policies that hurt the poor and ordinary Malaysians.

Prime Minister Najib Abdul Razak has outlined three criteria which must be practised by government agencies in order to be more innovative those:-

which could bring about a big impact for the nation,
were cost savings and shorter cycle times; and
improvements to the delivery system.

Whilst the withdrawal of subsidies for the poor would bring about a big impact for the nation, the refusal to ask Independent Power Producers(IPPs) to share the burden will not bring about cost savings, shorter cycle times or even improvements to the delivery system. Even though economists generally agree that reducing subsidies improves efficiency, any unequal reduction that impacts only on the lower income groups but spares the richer corporate sectors only causes distortions that will negate any efficiency gains.

Up to end 2010, Petronas has extended about RM131.3 billion in gas subsidy to both the power and non-power sectors, with almost RM19 billion annual gas subsidies to IPPs and the commercial power sector. Whilst the government can claim that the IPPs will have to bear a bit more in paying for gas, substantial subsidy savings can be earned by the Federal government by terminating the compulsory purchase of power generated by IPPs.

With Malaysia enjoying an energy reserve margin that is the highest in the world of 52.6%, there is no need for TNB to purchase power from IPPs that TNB does not need. IF TNB is not required to purchase power it does not need, then substantial gas subsidies can be saved as Petronas sells gas at less than 30% of the market rate.

How then can the Prime Minister develop an innovative culture for Malaysia if such crony capitalistic and anti-competitive practices are permitted in the country?

*Lim Guan Eng, DAP Secretary General & MP for Bagan