Nanyang Siang Pau, Editorial, 03-10-2014

Just when everyone was focusing on the increase in toll charges at the Causeway from October 1 by Singapore authority and also its impact on the transport industry and the people, Domestic Trade, Cooperative and Consumer Affairs Ministry announced on Wednesday that effective October 2, the retail price of RON 95 and diesel will increase 20 sen per litre, which means that the petrol price will be raised to RM2.30 from RM2.10 per litre, and the diesel price will be increased to RM2.20 from RM2.00 per litre.

The ministry said in a statement that the adjustment was made in line with the national policy to reduce subsidy, and was also a short and medium term measure to ensure that nation’s finances remain strong. It also said that the move was aimed at preventing fuel smuggling and to provide more funds to upgrade the basic amenities in the country.

In its efforts to rationalize the subsidy measures, the government has made several price adjustments on petrol this year. From July 16, 2010 until now, the petrol price has since been increased four times.

The latest price hike on petrol was on September 3, 2013. The government has announced before that it will gradually reduce the subsidy on petrol to strengthen the nation’s financial status. Hence, the move this time did not come as a surprise.

However, it is also expected that each time when there was a hike in fuel price, there would be another round of price increase in other good items. In other words, normally the fuel price increase is one of the crucial factors contributing to inflation. In modern society, goods and human movements rely greatly on transportation tools, and all the transportation tools are dependable on fuel. In view of this, the price increase in fuel will directly push up the costs on all other sectors and business sectors and industries will pass the extra cost to consumers, and the burden of the consumers will become heavier, this is an unavoidable chain effect.

According to market rules, business is business, when the cost is higher the selling price will also be marked up, and the consumers will inevitably have to bear the heavy burden at the end. In this respect, the public are more concerned with the hawkers and petty traders at the coffee shops; they are worried that the operators may take the fuel hike as an excuse, subsequently the price of a bowl of noodle and a cup of coffee may increase by 10 or 20 sen.

Although to sell at a higher price when the cost is higher does not go against the business principle, what concerned the public is the way the price of noodles and coffee is being increased. Does the Ministry of Domestic Trade and Consumer Affairs have any good idea to monitor the prices as well as to control the unethical price hike?

We suggest that the government to set up a mechanism in helping the low and middle income group. One of the methods is for the government to issue special preferential card on petrol to the motorists who earn less than RM3, 000 a month.

Another issue which concerned the people is the implementation of GST next year. According to the earlier report, petrol and diesel will not be exempted from the GST, will this trigger off another round of inflation?

Nonetheless, we hope the government will fulfill its promise in helping the low middle income group. Otherwise, with the price hike in fuel, the electricity bill, water bill and toll rate will also be increased, plus the enforcement of GST, the burden of the people will be very much heavier.

Original Source: 南洋社论：关注燃油涨价引起的经济效应