Kuala Lumpur – The Federation of Malaysian Manufacturers (FMM) calls for the Government to consider its earlier appeal in February 2022 for a moratorium on the Imbalance Cost Pass Through (ICPT) surcharge for the next review period (2H2022) until at least the review period of 1H2023 given the current extremely challenging business environment faced by the industry.
This request takes into consideration the six-month lag of the impact of fuel prices on the electricity tariff, in particular coal and natural gas, which have not moderated to a pre-Covid 19 level due to major disruptions to regional and global fuel markets and uncertainty caused by on-going Russia-Ukraine war.
Local manufacturers are currently under tremendous pressure to contain the increasingly challenging high operating costs given the high inflationary pressures, increase in minimum wage, labour shortages, rise in transportation costs, global supply chain disruption and weakening Ringgit.
As an example, the domestic food manufacturing industry is currently struggling to manage the various cost increases given that more than 50% of their raw materials are imported. Given the highly interconnected global supply chains and markets for food and associated inputs (raw materials, agrochemicals, fertiliser, fuel, feed, capital and labour), a small supply disruption in one region or sector would have dire consequences on another.
There has been a surge in food prices worldwide since mid-2020 driven by the recovery in demand following the pandemic, adverse weather impacts on supply, trade restrictions by some countries on food products and the rapid rise of input costs such as energy and fertilisers. The on-going Russia-Ukraine war has further added stress on food supply chains. Manufacturers’ ability to absorb higher operational costs in this current fragile period is very limited and would eventually have a cascading effect on consumer food items if no assistance is forthcoming to help curb some of the major input costs such as energy cost.
FMM is proposing that that the surcharge accrued during the proposed moratorium period could be spread out over several cycles of the subsequent tariff review period or off-set against the rebate for the subsequent review cycles, if any, until it is normalised.
FMM would like to reinforce that given these many challenges faced, industries are in a very precarious position and thus this is not the right time to continue with the ICPT surcharge or pass through a higher surcharge rate. We look forward to an engagement with the Ministry of Energy and Natural Resources and the Energy Commission to discuss a more palatable solution as when it comes to energy costs, industrial consumers that are also using natural gas at market price are experiencing a double impact due to the upward trend in the global energy pricing too.