M'sia CPI seen rising 3 per cent following electricity tariff increase

M'sia CPI seen rising 3 per cent following electricity tariff increase

KUALA LUMPUR - Businesses and households can expect costs to go up, as inflation trends higher in the wake of the new electricity tariffs effective Jan 1 for the peninsula as well as Sabah and Labuan.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said an early estimate showed that there could be a 0.4 per cent increase in the consumer price index (CPI), which measures headline inflation, including volatile food and energy costs, when the new electricity rates become effective.

Sarawak is not affected by the hike as its power supply and distribution are managed by state-owned Sarawak Energy Bhd. The state has a separate enacment on electricity production.

Economists expect inflation to rise above 3 per cent next year after picking up pace in recent months, as the Government consolidates spending with cuts in subsidies such as fuel, where the RON95 petrol and diesel prices were raised by 20 sen each on Sept 2 to RM2.10 (S$0.81) and RM2 per litre, respectively.

Data from the Statistics Department showed the CPI rose to 2.8 per cent year-on-year in October from 2.6 per cent in September and 1.9 per cent in August.

"Right now, it would be in the region of 3 per cent, but we don't know what other adjustments are to take place," Zeti told reporters at the Leadership Energy Summit Asia 2013.

However, she said the tariff hike's impact on prices would only be temporary based on the central bank's assessment of the trend.

"This is something that needs to be done because it is not sustainable when the market price changes, and therefore, it is important that Malaysia makes such adjustments," said Zeti.

The rise in tariffs, announced by Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili on Monday, would see those in the peninsula paying an average of 14.89 per cent or 4.99 sen more per kilowatt-hour (kWh) to 38.53 sen, while for Sabah and Labuan, the average tariff would rise 16.9 per cent or five sen per kWh to 34.52 sen.

For industry users, the average tariff will be raised by 16.85 per cent to 36.15 sen per kWh, while commercial users will pay 47.92 sen, up from 41.01 sen.

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