Hike in Electricity Bill to Impact SMEs Growth

Hike in Electricity Bill to Impact SMEs Growth

SAMENTA is alarmed by the recent announcement of a hike in electricity bills for commercial and industrial users. 

The hike, described as a ‘surcharge’ under the Imbalance Cost Pass-Through mechanism, can be called by whatever name, but it is going to hamper the recovery of our SMEs, it says.

From Energy Commission and Tenaga Nasional’s own numbers, more than 1.6 million commercial and industrial users will be paying between 11.8 to 18.4 percent more for electricity from 1 February 2022.

For most SMEs, especially those in the manufacturing sector, electricity is the second or third largest cost factor, behind raw materials and labour costs.

A hike of 18.4 percent in utility bill for a business that’s running at sub-10 per cent margin could mean a reduction of between 20 to 40 of its profit, and could even mean a difference between making and losing money. 

“While we can understand the need for periodic adjustments in prices, we cannot accept the quantum or the timing of it, especially since Tenaga Nasional reported a 9.6 per cent and 4.6 per cent jump in revenue and earnings respectively for the 9 months ending 30 September 2021,” says, Chairman, SAMENTA Central.

Coal price

Tenaga Nasional’s CEO, Dr Ir Baharin Din was quoted as saying that, “… demand is expected to improve in the coming months and into next year (2022) as more economic activities open for business”.

As such by Tenaga Nasional’s own admission, the national utility company will be doing better in the coming months. There is no reason for the steep hike, especially since it is aspiring to cut down its reliance on coal in its portfolio from 45 per cent in 2021 to 10 per cent by 2035, with the costs of coal stock chiefly blamed for this decision for the steep hike. 

“We urge Prime Minister Dato’ Sri Ismail Sabri Yaakob to step in to rescue our ailing SMEs as he has promised. If the hike must be allowed, then we urge the Cabinet to consider a far lower quantum of increment without affecting Tenaga Nasional’s continued profitability or its ‘resilient performance’.”

Imminent increase in prices

He says the country should expect an imminent increase of the prices of goods on the market with the electricity price hike.

“While we have urged and will continue to urge our members to refrain from raising prices despite this steep hike in electricity bill and costs of raw materials, we must also understand that most SMEs are already operating on a razor thin margin and are struggling to find their footing amidst the pandemic.

“If the proposed hike continues as planned, it will be difficult, if not impossible, for businesses to absorb the increased costs without passing them partially to the consumers, just as Tenaga Nasional is doing,” he says.