The government will incur higher expenses if it applies Parti Keadilan Rakyat advisor Datuk Seri Anwar Ibrahim’s method to reduce fuel prices.
Economics experts said the higher expenses will further burden the people and could lead to some development projects being postponed.
In last night’s fuel debate, Anwar said the fuel price could be reduced by 50 sen per litre if the Pakatan Rakyat formed the government through a formula of using RM5 billion to accomodate the price reduction.
He said the money can be got from saving on government expenditure including overcoming leakages and reducing the ‘standby capacity’ of power production of independent power producers (IPPs).
Dr Yeah Kim Leng, Rating Agency Malaysia Holdings Berhad’s group chief economist, said the government woud have to pay compensation to IPPs as they would be breaking contracts by lowering standby capacity.
“The government will have to bear the costs if contracts are broken,” he said when contacted by Bernama here today.
He said the price reductiion can be done but the government would have to cut back on other sectors to get the additional subsidy.
“It is not economically efficient…If the government wants to spend RM5 billion, they have to cut back on other areas,” he said.
Universiti Utara Malaysia’s Faculty of Economics lecturer Prof Madya Dr Mohd Zaini Abd Bakar said there was a possibility that foreign investors will be driven away if the country’s standby capacity was low.
“I do not know the terms of contracts between Tenaga Nasional Berhad (TNB) and the IPPs but if there are terms that say the contract needed to be re-newed, TNB can make a choice of not needing the IPPs as TNB has additional capacity,” he said.
He also did not deny that the government could reduce fuel price through efficient management of the country’s expenses.
“The government has to save on national expenses to cover back the fuel price reduction,” he said.
Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad earlier this week told the Dewan Rakyat the fuel subsidy including cash rebate paid to vehicle owners for the first six months amounted to RM10.25 billion, higher than the RM8.77 billion subsidy for the whole of last year. He said of the amount, RM4.006 billion was for petrol, RM5.056 billion for diesel and RM1.1188 billion for liquefied petroleum gas (LPG).
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