Gas Malaysia urged to defer gas price hike

PETALING JAYA: The decision by the government to increase gas tariff by 10% effective July 1 has been met with criticism from respective parties which questioned the lack of consultation prior to the announcement and clarity on the pricing mechanism.
The Malaysian Rubber Glove Manufacturers Association (Margma) was disappointed that it was not consulted prior to the announcement of the gas price revision which lead to an increase in cost and is asking that it be push forward to another 120 days.
Its newly elected president Denis Low lamented that the tariff increase will mean that the glove making industry will have to absorb the increase in cost as orders to supply are usually done at two to three months ahead.
"If Gas Malaysia and the relevant agencies had heeded the many pleadings of the industry players to give them sufficient time to work ahead of the increase cost, such cost would have been easily passed on to the overseas buyers instead.
"This would also mean a better absorption of cost all-round, with the nation reaping better revenue and foreign exchange as well. Margma really hope that the increase can be push forward to another 120 days" Low said.
He added that the timing of any increases must be simultaneous with the increase in prices of its product to the world. He pointed out that Malaysia is the world's largest exporter of natural rubber and nitrile gloves, with an estimated export value of about RM11.7 billion for year 2015.
"Therefore, the industry is of the opinion that any inevitable increase in cost should have been done on a consultation basis with industry players, and not done on an ad hoc basis," he said in a statement yesterday.
Margma estimated that the cost of the new increase in gas price will mean an additional cost of US$0.45 to US$0.75 per 1000 pieces of Nitrile glove and about US$0.35 to US$0.55 for latex glove.
"There will always be the element of a ripple effect as the supporting industries are also affected by this increase in cost. Basically, each manufacturer will have to adjust their pricing depending on the product type," it said.
Meanwhile, the Association of Water and Energy Research Malaysia (Awer) has urged the government to reveal calculation mechanism that reflects both the piped gas and liquefied natural gas (LNG) price.
It had said the revision was to take into account the increase in the purchase price of gas that Gas Malaysia procures from Petroliam Nasional Bhd (Petronas).
Awer president S. Piarapakaran noted that this development was contrary to the expectation that Malaysia would enjoy cost reduction beginning April this year, due to global low energy prices.
He pointed out that the Energy, Green Technology and Water Ministry (KeTTHA) had announced in a statement on Jan 21 that any decrease or increase in the world crude oil prices can only be reflected in the price of LNG for Peninsular Malaysia, after five to seven months.
KeTTHA's statement had said that this was due to the fact that the market price of LNG supplied to Peninsular Malaysia is linked to the ex-Bintulu LNG Price and the Japan Customs-Cleared Crude (JCCC) price, with a time lag of 2-4 months and 5-7 months respectively, said Piarapakaran.
"Why is the government increasing natural gas price, while Malaysia is supposed to enjoy cost reduction now, due to the time lag effect in LNG price? Does the price difference between piped gas and LNG equate to cost of liquefaction, shipping and regasification of LNG?" he asked.
"Has there been a transparent calculation reflecting international pricing mechanism that is widely accepted?" he further questioned.
In addition, he pointed to the special address by the Prime Minister on Jan 20, 2015 on the Current Economic Development and National Financial Status also mentioned that the government will postpone the natural gas price increase in 2015 to reduce costs of doing business.