KL may increase petrol price for first time in two decades
KL may increase petrol price for first time in two decades
KUALA LUMPUR (Reuters): Malaysia said on Wednesday that petrol prices were likely to be raised for the first time in nearly two decades, spurring concerns of higher inflation.
"There's a big possibility of an increase, but the quantum of the increase will be decided by the Ministry of Finance," Domestic Trade and Consumer Affairs Minister Muhyiddin Yassin told reporters.
"It's still being studied by the Ministry of Finance," he said.
Malaysia is considering allowing petrol prices to rise for the first time since 1983. It has also proposed a hike in bus fares of up to 33 percent.
Muhyiddin said the government would have to take into consideration the impact of higher petrol prices on various sectors such as transportation as well as on the inflation rate.
"We will consider all these factors so that it will not burden consumers. At the same time, it should also not burden the government," he said.
Muhyiddin's comments came after the government voiced concerns over rising energy prices. The price of North Sea Brent crude oil has doubled to about $30 a barrel since last year.
He said the government had spent nearly five billion ringgit ($1.3 billion) on petrol subsidies over the last eight to 10 years and would have to fork out another 500 million ringgit this year to keep pump prices for unleaded petrol at 1.10 ringgit (29 U.S. cents) a liter.
"The government cannot continue to bear the burden of subsidizing petrol prices forever," he said.
Muhyiddin said than even if petrol prices were to increase, they would still be the cheapest in the region apart from Indonesia.
Malaysia is a major non-OPEC oil producer and a net crude oil exporter.
"It will definitely have an impact on the inflation rate, but without knowing the quantum it's difficult to say how much of an impact," said Jason Chong, head of research at Merrill Lynch in Kuala Lumpur.
Markets consultancy firm Standard & Poors MMS agreed, saying the extent of the impact would depend on the size of the price hike and when it is implemented.
Malaysia's consumer price index, the barometer for inflation, increased by 1.5 percent between January and June compared with the same period last year.
The central Bank Negara has forecast inflation at 3.2 percent in 2000, up from 2.8 percent in 1999.
But a recent Reuters poll forecast year-on-year inflation at 2.7 percent in 2000.
Fuel and power sub-group constitute about five percent of the consumer price index.
Rating Agency Malaysia (RAM) on Wednesday sharply raised its economic growth forecast for 2000, but warned that inflationary pressures would mount on the back of a pick up in demand.
It forecast inflation to climb up to 3.1 percent in 2000 from 2.8 percent in the previous year.