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Friday July 11, 2008 MYT 5:33:11 PM

Industries get 70% discount on gas (updated)

PUTRAJAYA: Industries will enjoy a 70% discount on the market price of gas beginning July 1. The discount will be gradually reduced over 11 years by 5% to 10% until it reaches market price.

Minister in the Prime Minister's Department Tan Sri Amirsham A. Aziz said for small and medium sized industries, they would get their discounts gradually lowered within 13 years.

This new structure, he added, was to cater to the appeals from industries to reconsider the Government's recent announcement to increase gas prices on June 4.

"We felt the plight of the industries. There are some 1,500 companies which were affected by the previous announcement and they are critical to the economy.

"Under this new structure, industries using more than 2mil cubic of gas a day, will enjoy the new price of RM23.88 per mmmbtu (million British Thermal Unit), down from RM32.56 per mmmbtu, which was to have been effective this month.

"Those using less than 2mil cubic of gas a day, including 8,887 households which had gas piped in directly to their homes, will enjoy a price RM22.06 per mmmbtu beginning Aug 1," he told reporters Friday at his office here.

The pricing formula would be adjusted each year according to the market price of gas then, added Amirsham.

"Total subsidies will be borne by Petronas," he said, adding that the new pricing structure would however not be applicable for gas supplied to the energy sector. The discount is only for industries in the Peninsular Malaysia.

Amirsham said it was important to introduce the new structuring scheme as currently, Peninsular Malaysia was a nett importer of gas, with supply coming from Indonesia and Vietnam.

"We don't have enough to cater to the local industries here. With this structure, we hope to be able to encourage industries to be more efficient as well as build a sustainable policy of gas use.

"In the long run, our industries should be able to slowly adjust to the new prices of gas and transform themselves to effectively compete," he said.

Besides the discounts on the price of gas, Amirsham said the Finance Ministry was still considering offering other incentives to industries.

He said the ministry was also looking into the imposition of windfall tax on independent power producers.

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