ACCIM lauds move to review gas prices

  • Business
  • Monday, 19 Jan 2009

PETALING JAYA: Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCIM) had lauded the Cabinet’s decision to review the gas and electricity prices that have gone up tremendously due to the increase in oil price in 2008.

In a statement yesterday, it made an appeal for the gas and electricity tariffs to be reverted immediately to the old tariffs prior to the increase made last June and July, citing the seriousness of the current economic situation where many of the industries had cut back production and some even stopped production altogether.

“The increase in gas price was due to the hike in oil price to US$120 a barrel in 2008. Since the oil price has now dropped to about US$40 a barrel, we urge that the gas price for industrial use and for independent power producers (IPPs) revert immediately to the previous rates. The price of gas as a feedstock should also revert to the old price of RM6.80/mmbtu,” added the ACCIM.

Many companies using gas as feedstock or energy source have stopped production due to the high cost of gas.

They include steel mills such as Lion’s HBI and DRI plants, which stopped in October and November 2008 respectively.

Perwaja’s DRI plant, which is running at 50% capacity, may be forced to stop production if the price of gas is not reduced, as the industry players are unable to compete with other producers eg. Venezuela, Saudi Arabia, Qatar where their gas price is about US$1/mmbtu (compared to US$6.50/mmbtu in Malaysia).

Due to the increase in price of gas and coal, electricity tariffs increased by a hefty 25% on July 1, 2008.

This has a severe impact on industries, especially heavy users such as petrochemical, steel, ceramic, and glass manufacturing, whose electricity cost is a major portion of their production cost.

By reverting the gas price to the previous price of RM6.40/mmbtu for the IPPs and with the drop in coal price back to the previous level of US$70 per ton, the ACCIM said electricity tariffs should immediately revert back to the old tariffs before July 1, 2008.

Local industries are suffering during this economic crisis compounded by the high cost of production.

Many have stopped production or are operating at 30% to 40% capacity.

It further said that if no action was taken, many companies would close down leading to massive retrenchment and unemployment in the coming months.

“As the situation is rather critical, we urge the Cabinet to take immediate action to revert the gas and electricity tariffs back to the previous rates, effective from Jan 1, 2009, pending the review and negotiations by the authorities which may take a while,” it added. For latest Bursa Malaysia indices, charts and other information click here Latest business news from AP-Wire

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