DAP asks why subsidies not cut for ‘fat cat’ industries

The DAP mocked the prime minister’s “People First. Performance Now” philosophy today, asking if it meant ordinary Malaysians would be the first to face the brunt of subsidy cuts while independent power producers (IPPs) and other “fat cat” industries continued to enjoy such benefits.

DAP national publicity secretary Tony Pua pointed out that while the government would save RM750 million a year by cutting subsidies from today on fuel and sugar, it was still subsidising electricity utility Tenaga Nasional (TNB) and IPPs by up to RM18.9 billion a year.

Pua questioned why the government was punishing ordinary Malaysians instead of the IPPs, whom he called “fat cats”.

“The prime minister claimed that even after the latest subsidy cuts, the government will still spend RM7.82 billion for fuel and food subsidies.

“However, he failed to highlight the fact that Petronas will continue to provide subsidies to Tenaga Nasional, the IPPs and the industrial sector, which were RM18.9 billion for its financial year ending March 2010,” he said.

Pua claimed that of the RM18.9 billion more than 40 per cent, or nearly RM8 billion, went to the IPPs.

“Unfortunately, most of the subsidies to the IPPs do not translate into lower prices of electricity for users due to the unequal and unfair agreements which TNB was forced to sign with the IPPs.

“TNB has to not only purchase electricity from the IPPs at prices much higher than what it could produce on its own, but it has also to pay for the total capacity of these IPPs, regardless of whether there is a demand or otherwise.

“Hence, there is an excess capacity as high as 50 per cent today which has resulted in heavy subsidies for the IPPs, high prices of electricity for users and massive profits for the IPPs,” he said.

Pua said it was also disappointing how the Barisan Nasional (BN) government had prioritised subsidies to the people as the first expenditure to cut in order to reduce deficits caused by what he claimed was its “irresponsible and wasteful” spending.

“We agree that some of the subsidies to the rakyat need to be rationalised to ensure that the poor and needy receive a greater proportion of the benefits than the wealthy.

“However, the above should not be used as an excuse to victimise the people first without first taking concrete and visible actions to cut subsidies to large politically-connected companies or bloated expenditures for price-inflated projects,” he said in statement today.

Pua also slammed the government’s continuing practice of using direct negotiations for large-scale privatisation contracts, claiming it only led to bloated prices and higher risk of project failure due to the cost increase.

“For example, the government awarded the contract to build Malaysia’s largest exhibition and convention centre at the cost of RM628 million to Naza TTDI Sdn Bhd without any tender, open or closed.

“The government has also awarded a 20-year, interest-free, unsecured and back-loaded RM320 million loan to Syarikat Bekalan Air Selangor (Syabas), a private company, which will cost taxpayers more than RM250 million in interest,” he said.

He said the failure to tackle the issue of corporate subsidies and opaque procurement processes to “politically-connected” companies proved that the prime minister’s “people’s first” agenda only meant the people would be the first to suffer from the government’s “transgressions, incompetence and serious lack of accountability”.

The DAP man also ridiculed Prime Minister Datuk Seri Najib Razak’s claim yesterday that the latest subsidy cuts on sugar, petrol, diesel and natural gas would have “minimal impact” on all households in Malaysia.

He referred to what he called the ludicrous claims made by the Performance and Management Delivery Unit (Pemandu) in the Prime Minister’s Department on the actual impact of the subsidy reduction.

According to Pemandu’s fact sheet, said Pua, the upward price adjustment to teh tarik following the reduction in sugar subsidy would only be around RM1.55, or an increase of two sen.

“The impact on other popular items such as roti canai was stated as being 0.24 sen per piece, 0.6 sen for rice, 6.3 sen for meat per kg and 1.05 sen for mee goreng,” he added.

Pua accused Pemandu chairman Senator Tan Sri Dr Koh Tsu Koon of living in a “parallel universe” for having the audacity to publish such numbers which, he claimed, were at best only applicable in a “fictitious and theoretical universe”.

He said the figures showed Koh’s complete lack of understanding of real-world market dynamics on the prices of goods and services.

“I challenge Koh to find me a mamak stall in Malaysia which will increase the price of teh tarik by a mere 1.55 sen or the price of roti canai by a minute 0.24 sen in the entire country to prove the ‘minimal impact’ of the latest round of 5-in-1 price increase,” he said.

Pua said anecdotal evidence in previous price hikes had shown that price adjustments would be increased by a percentage much larger than the theoretical impact of the price hikes due to real-world imperfect market.

“The government should instead stop spewing these ridiculous and out-of-this-world hypothetical data but instead demonstrate how it will not only seek to trim the subsidies which affect the people directly, but also the wasteful expenditure and subsidies to crony companies as well as clamp down on corruption which will have a much larger impact on government finances,” he said