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Tuesday, May 31, 2011

Economist: Expect food prices to go up, too


Economist Yeah Kim Leng says the food industry would be heavily affected by the tariff hike.
Food prices are expected to increase with the announcement of electricity tariff hikes, as the food production industry are major users of electricity.

NONEAccording to Ratings Agency Malaysia chief economist Yeah Kim Leng (right), the industry would be heavily affected by the progressive tariff hike.

“Seventy-five percent of households escape the direct effect of the tariff hike but they will have to bear the burden as producers will pass on the higher costs to consumers,” he said when contacted.

As a result of inflationary pressures, Yeah said that it is advisable that the government stagger its subsidy cuts for different items, for example for petrol.

“If the government cuts subsidies for petrol now it will be a double blow for producers who will in turn put pressure on consumer prices,” he said.

Earlier today, Energy, Green Technology and Water Minister Peter Chin said that for those using 301kW to 1000kW units, the tariff has been raised from 0.1 to 10 percent, or RM0.07 to RM30.30 beginning June 1.

The ministry estimates that the small-scale food processing industry and retailers and small restaurants, which use less than 200kW, would only sustain a tariff increase of between 6.2 percent and 6.4 percent.

The government also said that industries for which 5 percent of its expenditure is made up of the electricity tariff would be unaffected as the tariffs will remain unchanged.

This, however, does not cover all industry players who use more than 200kW units a month.

Chin also announced that users whose electricity bills is less than RM20 will have to pay their bills beginning Dec 31, 2011.

Yeah said that this would put more pressure towards the low-income group, even though the amount could be small.

“It may not be significant but it nevertheless is an additional utility expense for the poor and should have been absorbed,” he said.

a kugan detention death funeral ummc to puchong 280109 kuala selangor mp dr dzulkefly ahmadThe government has to fork out RM122 million in order to provide free electricity to 900,000 such users. According to Kuala Selangor parliamentarian Dr Dzulkefly Ahmad (left), the burden on the poor should be seen not just in terms of quantum but also in proportion to their wages.

“Low income earners find it difficult to get pay rises as it is,” he said, adding that RM20 would represent a higher proportion of a low-earner's income compared to those who earn more.

The PAS central committee member added that hikes in food prices in a second round effect will be a double blow for low-income families.

“Food prices do not differ for the rich or the poor. Essentials are the same price for everyone so when the cost of groceries increase for the rich, it will hurt the poor even more,” he said when contacted.

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