Business

Tuesday July 8, 2008

FMM: Gas price hike will hurt nation


KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) says a drastic increase in natural gas price would lead to widespread repercussion and contribute to greater inflation rate, its president Tan Sri Yong Poh Kon said.

“When the Government announced the increase in fuel prices on June 4, our members raised concerns that the gas price would go up to RM32.56 per million btu (British thermal unit) from the current RM11.32 per million btu an increase of 2.6 to 2.8 times the current price.

“With such a hefty increase in the energy cost, some of their margins will be eroded and some companies might even be forced to retrench or even wind down their operations,” he told Bernama .

He said FMM members hoped the Government would implement a staggered increase in gas price to enable them to make the necessary adjustments.

Yong Poh Kon

The hike in energy prices was too sudden for the factories to adjust, as sales in the manufacturing sector were usually contracted months ahead, he said adding that prices of products would be locked in at the old energy price levels until a new sales contract or order is negotiated.

Energy costs could increase at least 13% and for one company, as high as 138%. Many companies would be adversely affected together with the small and medium enterprises suppliers.

“We have submitted the industry's feedback to the Government's Anti Inflation Council, chaired by Prime Minister Datuk Seri Abdullah Ahmad Badawi, on June 9, with further updates on the impact on June 30, ,” said Yong who also sits on the council.

Yong said the industry was prepared to go to market price on energy, but the initial jump was too large and too sudden.

“The initial jump should be moderated over two to three years and thereafter increased progressively on gradual basis.

At the Anti Inflation Council, the prime minister and the relevant ministers were receptive to FMM's proposal and advised the Sub Committee on the Utilisation of Energy Resources to work with the industry accordingly. – Bernama


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