Gas tariff for non-power sector to rise 6% from July 15

Posted on 30 June 2016

Source: The Sun Daily

Gas Malaysia Bhd said the government has revised the natural gas tariff for the non-power sector in Peninsular Malaysia effective July 15, 2016.

In a filing to Bursa Malaysia yesterday, the company, however, said there will be no change in the selling price for residential consumers.

The average gas tariff will be revised upwards by 5.95% to RM27.05/MMBtu from RM25.53/MMBtu. The revision is in line with the national rationalisation plan and gas cost pass through mechanism whereby the adjustment to the price of piped gas will take place every six months.

“While the tariff revision has no material impact on Gas Malaysia’s business operations, it is expected to contribute positively towards the financial position of the company for the financial year ending Dec 31, 2016,” Gas Malaysia said.

The Malaysian Rubber Glove Manufacturers Association (Margma) noted that while there is a need for subsidy rationalisation by the government, the current global economic situation should be taken into consideration.

President Denis Low Jau Foo said the 6% increase is not what the glove industry wished for but it is still considered reasonable.

“The quantum of the gas price hike this round is tempered and we hope that the price of natural gas will remain stable for the next one year to allow the industry to deal with other cost increases such as the minimum wage order 2016 which will take effect on July 1, 2016,” he told SunBiz via email.

The last natural gas upward revision was at 17.2% in January this year.
Low pointed out that although there is a longer notice period of 16 days for this round of price revision, a much longer time of two months is needed, as orders are normally placed months ahead.

Nevertheless, Low is of the view that the natural gas price increase, coupled with the minimum wage rise, will bring a ripple effect to production costs, whereby an additional cost of US$0.20 to US$0.30 (81 sen to RM1.21) will be incurred for 1,000 pieces of nitrile gloves and US$0.20 to US$0.50 for latex gloves.

“Each manufacturer will have to adjust their pricing depending on the product type and their manufacturing costs,” he said.

 According to Low, glove prices need to be adjusted in line with both natural gas and minimum wage factors, with an expected increase of US$0.40 to US$0.60 in prices for every 1,000 pieces.

Low is urging Margma members to expand according to their market demand to ensure that prices continue to be stable. “Margma will advise its members to inform their customers immediately as selling prices have to be fixed in advance and the 16-day notice given in this price hike is too short.” 

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