Let IPPs choose Mesita route

  • Letters
  • Monday, 04 Aug 2008

I WOULD like to propose another option to the windfall tax recently imposed on the independent power producers (IPPs), a move fiercely resisted by them.

The Government should consider persuading the IPPs to raise their contribution to the Malaysian Electricity Supply Industry Trust Account (Mesita) from 1% to, say, 3% of their audited annual revenue less the cost of fuel.

The Mesita fund was set up in 1977 when IPPs made their debut in the electricity generation sector.

The fund’s primary objective then was to finance the country’s rural electrification programme; thus by contributing to the fund, IPPs share in the responsibility of raising the living standards of rural communities through electrification.

To date, over RM730mil have been collected, of which more than RM500mil came from the IPPs.

Nearly every rural community in Peninsular Malaysia is electrified, and the Government is now targeting to achieve 100% electrification in Sabah and Sarawak.

To realise this, the Government may want to consider extending the outreach of the fund to both states.

We know that the greater the expanse and the more remote the community, the more costly it is to supply electricity to the people.

So a bigger contribution from the IPPs to Mesita would speed up meeting the government target.

I believe this option will be more palatable to the IPPs than the windfall tax in that the money contributed to Mesita would be dedicated for rural electrification as well as other uses resulting in the sustainable development and improvement in the country’s electricity sector.

Money paid in the form of the windfall tax will go straight to the Government’s consolidated fund, which would then be dispensed according to the government priorities of the day.

The extra contribution could be used to promote the generation and usage of renewable energy, for example, encouraging the conversion of abundant palm oil waste into thermal energy or electricity via higher tariff and other incentives.

Likewise, the additional funds could be used to aggressively promote energy efficiency projects.

Although renewable energy is designated as the fifth fuel in the electricity generation mix, and promotion of both renewable energy and energy efficiency is spelt out in the 9th Malaysia Plan, there is actually no funding allocated for both activities.

An allocation for such activities from the Mesita fund would provide the sorely needed boost.

Dr POLA SINGH, Kuala Lumpur.

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