Thursday, December 23, 2010

Price Hike III - what is going on? BN must explain

Written by Tony Pua

The proposed 20 sen increase in beverage prices by the Kuala Lumpur & Selangor Coffee Shop Association in 2011 debunks the Prime Minister's claim that the Government's cut in subsidies will have “minimal impact” on households in Malaysia
In July, the Government launched a surprise “5-in-1” price hike programme, raising the prices of RON95 and RON97 petrol, diesel, white sugar and liquified petroluem gas (LPG) including cooking gas cyclinders by at least 2.8% and as much as 15.2%.

Then on 3 December 2010, less than 5 months later, another series of hikes is announced - the price of RON95 will increase by five sen to RM1.90 per litre, diesel by five sen per litre to RM1.80 and liquefied petroleum gas (LPG) by five sen to RM1.90 per kg. Sugar will also cost 20 sen more at RM2.10 per kg.

In fact for white sugar prices, inclusive of a 20 sen hike in January on top of the 25 sen and 20 sen hike in July and December, prices have increased by more than 55% this year alone.

The Prime Minister, Datuk Seri Najib Abdul Razak had in July claimed that the price increases will have “minimal impact” on households in Malaysia. This is further reiterated by the Minister in Prime Minister's Department and CEO of Pemandu, Datuk Seri Idris Jala more recently on 4 December via its Subsidy Rationalisation Factsheet that the 2nd round of price hikes “will result in minimal impact to consumers”.


In July, Pemandu “demonstrated” that the new teh tarik price taking into the impact of subsidy reduction of fuel and upward price adjustment would be around RM1.0155, or an increase of less than 2 sen in full page advertisements across all major mainstream newspapers.

After the December hikes, the new Subsidy Rationalisation Factsheet1 rationalised that a glass of “teh tarik” and “kopi susu” costing RM1.20 is expected to increase in price by 0.8 sen and hence will not cost more than RM1.21 or a tiny 0.83% hike in prices. (The fact sheet actually says 0.6% increase for “teh tarik” and 0.5% for “kopi susu” – somebody in Pemandu failed their mathematics).

Firstly, there is a clear contradiction in “teh tarik” prices between the fact sheet issued in July which was only RM1.00 as compared to the new base price of RM1.20 in the December fact sheet. The 20% “mysterious” 20% increase in the base price between July and December remains unexplained.

Secondly, and more importantly, Barisan Nasional and Pemandu lives in a parallel imaginary universe of price hikes involving increases of 1.55 sen or even 1 sen. I had issued a statement in July arguing that Pemandu should be “commended” for the audacity to publish such numbers which are at best applicable only in a fictitious and theoretical universe, and at worse, showing the complete lack of understanding of real world market dynamics on the price of goods and services.

And to prove my point, it was reported yesterday in all major Chinese newspapers that the Kuala Lumpur & Selangor Coffee Shop Association has announced the proposal to increase all beverage prices by 20 sen starting 1st January 2011. “Kopi susu” and “teh susu” prices will be increased from RM1.20 to RM1.40 translating to a massive 16.7% increase in prices!

Even the price of everyone's coffee shop favourite “herbal tea” will be increased from RM1.10 to RM1.30 or a hike of more than 18%. And Pemandu had the audacity to claim that “herbal tea” prices will only increase from RM1.00 to RM1.012 or just a 1.2% increase!

In fact, out of the 70 everyday food and drink items listed on the Subsidy Rationalisation fact sheet, no item is expected to increase by more than 1.9% after the most recent round of price hikes!

The Star has also reported on 20th December that evaporated milk and sweetened creamer is also expected to increase by 30 sen next year, after a 5 sen and 10 sen increase in April and October this year, marking an overall increase of up to 20% within a year.

What is perhaps most embarrassing is for the Domestic Trade, Cooperatives and Consumerism Deputy Minister, Datuk Tan Lian Hoe to argue that a 10 sen increase in beverage prices “will be more reasonable”. A 10 sen increase will still result in a 8.3% increase for the price of “teh tarik” and “kopi susu”, 10 times higher than the 0.83% increase claimed by Pemandu. If the BN government even believes in its own policies, Datuk Tan Lian Hoe should openly insist that only a 1 sen increase is justifiable.

The government should instead stop spewing these ridiculous and out-of-these-world hypothetical data which demonstrate at best its sheer incompetence and irrelevance, or worst, its blatant attempts at misleading the rakyat with preposterous falsehoods in order to justify the continued price increases. We are disappointed that the BN government has prioritise its “subsidy rationalisation” efforts on items which will worsen the living conditions for the man-on-the-street, but has not lifted a finger to “rationalise” the more substantial RM8 – 10 billion of subsidies given to independent power producers who are already making billions of ringgit in profits annually despite repeated promises to do so.

The above makes a complete mockery of the Prime Minister's slogan of “people first”, for it demonstrates that the people's interest don't come first under the BN government, but instead the people's subsidies get cut first.

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