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FMM appeals for moratorium on power surcharge until 1H2023

FMM In The News: THE EDGE MARKETS, KUALA LUMPUR, Thursday, June 16, 2022 - The Federation of Malaysian Manufacturers (FMM) has made a fresh call for a moratorium on the Imbalance Cost Pass Through (ICPT) surcharge for the next review for the period of 2H2022 until at least 1H2023.  

The ICPT review, which is done in January and July, is to decide on the imposition of surcharge on electricity bills for a six-month period. There is strong indication that the government will approve a surcharge for 2H2022 amid the rising fuel prices.  

“FMM is proposing 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 president Tan Sri Soh Thian Lai said in a statement.

FMM, which had made a similar appeal for a moratorium in February, cited the current challenging business environment faced by industries.

Soh said now is not the right time to continue with the ICPT surcharge or pass through a higher surcharge rate because industries are in a very precarious position.

“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 ongoing Russia-Ukraine war,” he said.

FMM is seeking an engagement with the Ministry of Energy and Natural Resources and the Energy Commission to discuss a more palatable solution on energy costs, noting that industrial consumers who are also using natural gas at market price are experiencing a double impact due to the upward trend in the global energy pricing.

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 of the ringgit, said Soh.

He said the domestic food manufacturing industry is struggling to manage the various cost increases given that more than 50% of their raw materials are imported.

“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,” he added.

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