Fuel Subsidy Revision: Effects

Just as I finished my dinner, I read the news the fuel subsidy is revised and the new pump price for petrol would be RM2.70 compared to the previous RM1.92. Diesel prices meanwhile increased to RM2.58 from RM1.58. Quite a big jump compared to previous increases and will definitely affect inflation figures for Malaysia.

Reading the official announcement from the Prime Minister's office, I read and try to comprehend the extent of the effects that would be felt on the local market.

On the effects on private vehicle owners, a cash rebate of up to RM625 a year will be given whenever they renew road tax. No news on taxi drivers, but most likely fall on the "others' category which will receive up to RM200 rebate on road tax. Their best bet is to fully convert to NGV engines as the gas prices will not be affected.

TNB however will receive a healthy boost to it's stock prices thanks to a 18% increase of tariffs for homes and up to 26% for commercial users. Bad news for factories and aircon home users.

This caught my interest although I don't fully understand how the effects will be felt just yet. This is regarding IPPs that provide electricity to TNB and has an agreement to completely sell all their electricity to TNB whether TNB needs it or not. Companies like YTL-POWER are going to be affected by this.

"IPP dijangka menjana keuntungan lebih daripada pulangan pasaran. Selaras dengan penstrukturan semula subsidi bagi gas, Kerajaan telah memutuskan untuk melaksanakan peruntukkan di bawah Akta Levi Keuntungan Berlebihan 1998 (Windfall Profit Levy Act 1998), ke atas IPP, sebagai sumbangan mereka terhadap kenaikan kos bahan api untuk menjana tenaga elektrik. Kuantum bagi levi itu adalah 30 peratus daripada lebihan pulangan aset pada nilai threshold melebihi 9 peratus berdasarkan akaun mereka yang diaudit."

Really need an explanation on the last sentence as I don't know how this works.


Mean while the Palm Oil industry will also be affected by the abolishment of subsidy and be subjected to the same levy of up to 15% on prices above RM2000 per tonne. Price of crude palm oil is currently RM3500 per tonne. The millers will be subjected to this and I can't wait to see how this plays out in the market.