MANUFACTURERS are appealing to Putrajaya to defer any increase in electricity tariff as they have yet to recover from Covid-19.  

Federation of Malaysian Manufacturers (FMM) president Soh Thian Lai said that while they are grateful for the one-year extension, where the base tariff and  rebate were maintained throughout 2021, they are now of the view that this is not the right time to impose any upward revision in tariff. 

This, he said, was especially true for the manufacturing sector as many industries are still vulnerable as they continue to recover from the pandemic and the impact it has had on their sustainability.  

“We are disappointed that FMM was not engaged given the present circumstances and the difficulties faced amid the current Covid-19 operational challenges and risks that are still looming with the highly contagious Omicron variant.  

“As it is now, industries are already struggling with inflationary pricing on almost all business costs,” he said in a statement today.

Soh was commenting on a statement by Energy and Natural Resources Minister Takiyuddin Hassan, who said Putrajaya will be announcing the revised electricity tariff before February 1.  

He said the new rates have been discussed in the cabinet six times and it was finalised on Wednesday.  

“We will announce it soon. We will implement the Incentive-Based Regulation (IBR) on February 1 for the third year. 

“So you can guess when we will implement the new tariff, maybe before the announcement of the IBR,” Takiyuddin said. 

Soh said that manufacturers would struggle to deal with higher prices of energy, which would also have a cascading effect on other cost items, especially raw materials that may further increase inflation. 

He said that if operational costs continue to increase, manufacturers may need to make some adjustments either by increasing the product prices, which is the last resort due to the market’s competitive nature.

“Or implement other cost rationalisation strategies such as reducing administrative and personnel expenses, including freezing hiring. 

“This would then derail business recovery efforts. Manufacturers’ ability to absorb higher operational costs in this current fragile period is very limited.”

Soh reiterated that any base tariff review should also address the long standing cross-subsidisation in the electricity tariff categories towards creating a more energy efficient and sustainable energy usage in the country. 

“Due consideration should be given to the energy intensive but efficient companies as well as companies that have invested in energy efficient and renewable energy initiatives in line with the government’s commitment to reduce greenhouse gas emissions.”

He added that FMM wants Putrajaya to defer any upward increase in electricity tariff preferably until the global supply chain constraints have eased and commodity prices normalise.

He said this is because the manufacturing sector, which makes up approximately 37% of Tenaga Nasional Bhd’s electricity sales, also faces other challenges to support their recovery, including manpower shortages, export constraints due to the higher freight rates. 

“FMM also calls for the effective date of any tariff review to factor in sufficient time for the industry, especially exporters, to adjust accordingly.” – January 28, 2022.