Time to slash gas subsidy for power plants
Athi VeerangganPublished: Feb 17, 2009 6:55 AM | Updated: Feb 17, 2009 12:32 PM
International Trade and Industry Minister Muhyiddin Yassin should restructure the national gas subsidy and supply policy that has led Malaysians to pay RM62.6 billion in gas subsidies to the power sector since 1997.
International Trade and Industry Minister Muhyiddin Yassin should restructure the national gas subsidy and supply policy that has led Malaysians to pay RM62.6 billion in gas subsidies to the power sector since 1997.
Penang Chief Minister Lim Guan Eng stressed that the minister should prove his reformist credentials by urgently initiating the restructuring process in a sector that led the country to lose up to RM14 billion in foreign investments over the past 12 years.
Muhyiddin admitted recently that eight companies from Japan, US and Europe in energy intensive industries such as steel and glass manufacturing were holding back up to RM8 billion investments because the lack of a secure supply of gas from Petronas.
However, Muhyiddin missed on another RM6 billion in foreign investment lost by Penang from solar-related investors from America and Germany due to the gas shortage.
"Despite the minister correctly linking the lack of gas supply to Petronas committing all its gas production till 2014, nothing has been done to resolve this shortage," said Lim in a statement today.
Urgent need to redirect supply
He said there is an urgent need to redirect supply, especially from the independent power producers (IPPs) to manufacturing and domestic use.
According to Lim, it would be a waste of funds to construct a pipeline without gas supply.
"It is imperative that the government reforms its national gas policy with an immediate redistribution of gas away from IPPs by increasing the supply for manufacturers and domestic consumption from 12% to 30%," he said.
Petronas has reportedly spent RM11.5 billion to build the Peninsular Gas Utility System (PGU System) pipeline to supply gas throughout the country.
Currently Petronas Gas supplies 65% to the power sector, 15% to its own subsidiaries and joint ventures, 12% to domestic and manufacturing with the remainder 8% to Singapore.
By oversupplying to the power sector, especially IPPs, Lim said this not only generated a severe shortage but also resulted in enormous subsidy payments of RM62.6 billion, with some RM35.7 billion being channeled to IPPs.
Profits are never shared
Gas subsidies to IPPs account for 46% of the total gas subsidies of RM77.9 billion or 57% of the total gas subsidies given to the power sector of RM62.6 billion.
"Subsidies for IPPs are higher compared with TNB's RM26.9 billion," said Lim, who has been among the most vocal critics over Petronas financial administration.
"Giving gas subsidies to TNB may be justifiable to allow consumers to enjoy lower tariffs. What benefit would the 27 million Malaysian consumers get from the 23 IPPs that enjoy these gas subsidies?
"The IPPs cumulative profits of tens of billions of ringgit are never shared with ordinary Malaysians."
Lim stressed that it would be pointless to merely acknowledge the adverse consequences caused by gas shortage if there was continued denial over the wrong national energy policy favouring IPPs.
"The country and Penang can ill afford to sustain huge gas subsidies to IPPs and continue to suffer loss of foreign investments," he added.
Penang Chief Minister Lim Guan Eng stressed that the minister should prove his reformist credentials by urgently initiating the restructuring process in a sector that led the country to lose up to RM14 billion in foreign investments over the past 12 years.Muhyiddin admitted recently that eight companies from Japan, US and Europe in energy intensive industries such as steel and glass manufacturing were holding back up to RM8 billion investments because the lack of a secure supply of gas from Petronas.
However, Muhyiddin missed on another RM6 billion in foreign investment lost by Penang from solar-related investors from America and Germany due to the gas shortage.
"Despite the minister correctly linking the lack of gas supply to Petronas committing all its gas production till 2014, nothing has been done to resolve this shortage," said Lim in a statement today.
Urgent need to redirect supply
He said there is an urgent need to redirect supply, especially from the independent power producers (IPPs) to manufacturing and domestic use.
According to Lim, it would be a waste of funds to construct a pipeline without gas supply.
"It is imperative that the government reforms its national gas policy with an immediate redistribution of gas away from IPPs by increasing the supply for manufacturers and domestic consumption from 12% to 30%," he said.
Petronas has reportedly spent RM11.5 billion to build the Peninsular Gas Utility System (PGU System) pipeline to supply gas throughout the country.Currently Petronas Gas supplies 65% to the power sector, 15% to its own subsidiaries and joint ventures, 12% to domestic and manufacturing with the remainder 8% to Singapore.
By oversupplying to the power sector, especially IPPs, Lim said this not only generated a severe shortage but also resulted in enormous subsidy payments of RM62.6 billion, with some RM35.7 billion being channeled to IPPs.
Profits are never shared
Gas subsidies to IPPs account for 46% of the total gas subsidies of RM77.9 billion or 57% of the total gas subsidies given to the power sector of RM62.6 billion.
"Subsidies for IPPs are higher compared with TNB's RM26.9 billion," said Lim, who has been among the most vocal critics over Petronas financial administration.
"Giving gas subsidies to TNB may be justifiable to allow consumers to enjoy lower tariffs. What benefit would the 27 million Malaysian consumers get from the 23 IPPs that enjoy these gas subsidies?
"The IPPs cumulative profits of tens of billions of ringgit are never shared with ordinary Malaysians."
Lim stressed that it would be pointless to merely acknowledge the adverse consequences caused by gas shortage if there was continued denial over the wrong national energy policy favouring IPPs.
"The country and Penang can ill afford to sustain huge gas subsidies to IPPs and continue to suffer loss of foreign investments," he added.
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