MPRA express concern over revised electricity subsidy scheme

Kuala Lumpur, The Gulf Observer: Malaysia Plastics Recyclers Association – MPRA has expressed its concern over the potential impact of the revised electricity subsidy scheme on the industry.

Its secretary-general Datuk Johnson Yoon said the announcement by the Natural Resources, Environment and Climate Change (NRECC) Ministry would negatively impact plastic recyclers and have a knock-on effect on local consumers.

“While we understand the rationale of the targeted subsidy scheme, we are very concerned about the impact of the drastic increase in electricity cost as it will not only have a negative impact on the plastics recyclers, but the increase will have a knock-on effect that would flow to local consumers as an increase in the cost of goods and services, and adversely affect exports.

“Electricity costs form a large portion of the plastics recycling manufacturing costs, ranging from 25 per cent to 30 per cent, depending on the type of production processes,” he said in a statement today.

The revised scheme will not increase the electrical tariff surcharge on domestic and low voltage non-domestic users, but medium and heavy voltage industrial users will have to pay a surcharge of 20 sen per kilowatt hour (kWh) from January 1 to June 30 this year.

Yoon said MPRA is appealing to the government for a more gradual surcharge rate to ease some of the cost burdens on industrial users and consumers.

He added that the plastics recycling industry was very competitive, and most small and medium-scale enterprises (SME) plastics recycling manufacturers were operating at net profit margins of between 3 per cent and five per cent of their revenue.

He said such a drastic cost increase would wipe out these manufacturers’ margins.

“The 20 sen per kilowatt hour (kWh) electricity surcharge or approximately 44 per cent increase in electricity tariff will translate into a net increase of between 14 per cent and 18 per cent in the plastics recycled resin manufacturing cost.

“Consequently, plastics recycling manufacturers will have no alternative but to pass on part of the cost increase to the end consumers.

“This will adversely impact local consumers in Malaysia and will also affect exports because the sharp spike in cost will render Malaysian plastics recycled products less competitive in the global market,” he said.

The manufacturing process for plastic recycling involves the melting of plastic waste and scrap, of which electricity consumption is invariably high.

Yoon added that SME plastics recycling companies are affected as they fall under the medium voltage category due to the power consumption level.

“This is contrary to the perception that SME companies were not affected by the increase in surcharge,” he said, adding that the recycled plastic resins were used in many electrical, electronics and automotive sectors.

Recycled materials are also used for circular economy initiatives where brand owners are considering incorporating recycled materials in their products to meet global commitments to the circular economy.