Govt to spend RM10.76b subsidising electricity for domestic, SME users

 

Natural Resources, Environment and Climate Change Minister Nik Nazmi Nik Ahmad has announced that the government will allocate RM10.76 billion in subsidy for electricity tariffs.

“In total, the government is allocating RM10.76 billion in subsidy to ensure this is done for the best interest of the nation,” he said in a press conference today, in conjunction with the electricity tariff adjustment for Peninsular Malaysia for the period of Jan 1 to June 30, 2023.

Nik Nazmi pointed out that the actual cost of the subsidy to maintain the current electricity tariff is RM14.91 billion.

“However, with this targeted subsidy scheme, an additional allocation of RM4.16 billion which would have gone to bear the cost of electricity subsidy, can now be allocated to help the rakyat through other means,” he said.

The minister added that lower voltage (LV) non-domestic users which include micro-businesses, small and medium enterprises including restaurants, groceries, bakeries and small workshops, among others, will not be facing any electricity tariff increase as well.

“For this category of users, the government allocates RM8.74 billion in subsidy.”

To ensure that there is no increase in prices of food and agricultural products, users such as farmers and animal breeders which are categorised as specific agriculture (tariff H) will also not incur any electricity tariff increase.

The government allocates RM90 million in subsidy for this category of users, he said.

“This means that nine million electricity users which are over 90 percent of users in the whole of Peninsular Malaysia will not be affected by the increase in fuel prices for electricity generation,” he added.

However, medium voltage (MV) and high voltage (HV) users among industry participants including multinational corporations (MNCs) will face a surcharge at a rate of 20 sen/kWh for the period of Jan 1 to June 30, 2023.

He said the government will subsidise RM1.93 billion in order to avoid a significant increase in the surcharge should it be passed on entirely to the users.

Global energy crisis

The minister highlighted that the global energy crisis has given rise to unprecedented pressure on the electric energy industry due to the significant increase in fuel prices.

Nik Nazmi said this has led to soaring costs of electricity generation and the electricity tariff adjustment through the Imbalance Cost Pass-Through (ICPT) mechanism being at a high rate of RM7 billion from the period of January to June this year, and RM16.16 billion from the period July to December.

At the increased cost of generation, all electricity users in the peninsula could be charged a surcharge of 27 sen/kWh for the period of Jan 1 to June 30, 2023, which will increase the cost of living should it be passed down entirely to users.

Meanwhile, should the whole cost of ICPT be subsidised, the government will have to bear a larger budget allocation and a great burden, he said.

“We recognise and very much appreciate the role that MNCs and large companies play in our economy as well as its recovery.

“At the same time, we believe in the nation’s ability to move from low-cost competition to value-added competition. We believe the current approach is the most appropriate for the time being,” he added.

Nik Nazmi noted that the ministry is also committed to navigating the transition to sustainable energy usage, whilst balancing energy security, affordability, and environmental sustainability.

Asked if the increase in electricity tariffs was imposed on MNCs, he said the increase will encourage MNCs to save electricity and switch to efficient energy sources and he would discuss with the Domestic Trade and Consumer Affairs Ministry if the issue of price increases occurred.

- Bernama