KUALA LUMPUR, The recent fuel and natural gas price hike is expected to have an adverse impact on manufacturing costs as well as the overall economy, according to the Federation of Malaysian Manufacturers (FMM).
Saying that it recognised that the price of energy had to increase in the light of rising fuel prices worldwide, the federation said the quantum of increase was too hefty.
"The industrial sector would find it difficult to adjust to such a massive jump within a short time. This high level of increase would wipe out company profits in most industries," the FMM said in a statement Friday.
It was of the view that the industrial sector should have been given adequate notice and time to plan and adjust to international price levels.
"We urge the government to review the initial massive jump to a level that will sustain business growth," it said. The FMM also asked for clarification on the natural gas price for industry users of below two million standard cubic feet per day (mmscfd).
Currently, users in this category are paying RM12.87 per million British thermal units (mmBtu) and not RM9.40 per mmBtu to Gas Malaysia, the federation said.
"If Gas Malaysia is paying RM24.54 mmBtu, it is unclear what price it will charge manufacturers in turn. This ambiguity has to be clarified," it said.
The FMM also expressed concern over the availability of additional natural gas supplies for manufacturing, urging the government to consider re-allocating 10 percent of natural gas supplies from the power sector to manufacturing.
It claimed the move could further reduce the Governments subsidy burden and give Petronas additional revenue.
The FMM also urged the government to strictly enforce and monitor energy efficiency in the power sector, in particular that of Tenaga Nasional.
To mitigate the adverse impact of the fuel price increase, the federation also proposed a number of initiatives for consideration by the government.
Among these are to stagger the initial increase of the natural gas price to mitigate the massive jump and review the price differential charged to industry as against independent power purchasers as manufacturing only accounts for 20 percent of gas consumption.
The federation also asked that the Special Industrial Tariff scheme be automatic for energy-intensive industries.
In addition, it proposed to expand the scope of the Industrial Adjustment Fund to cover all industries and remove barriers to co-generation activities in manufacturing while providing a one-off grant to the industry to upgrade plants to utilise more energy-efficient machinery and processes.
BERNAMA
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