The recent removal of a 34 sen per kilogramme subsidy on sugar is not the reason why sugar prices are high in Malaysia, says DAP's Petaling Jaya Utara MP Tony Pua.

Instead, it was the government's decision to hedge the price of imported raw sugar at too high a price that led to this situation, he said.

As such, he said, the government should stop giving "illogical" excuses like diabetes and "libido" to justify the subsidy cut, investigate why a shoddy deal was made and take corrective measures.

NONEReferring to an agreement in 2012, Pua (right) said that if the government did not hedge raw sugar prices at US$26 per 100 pounds for three years, it would not even need to pay subsidy to keep sugar prices low.

This is because the global market price for raw sugar today is US$18.91 per 100lb, 24 percent lower than the price Malaysia is paying for its raw sugar as per the deal.

He said that this translates to overpaying by RM194 million on average per year.

"The real reason the people are 'enjoying' expensive sugar now is that the government had signed an agreement to import raw sugar at a price that is too high.

"If we were paying the international market price of raw sugar of US$18.91 per 100lb, not only will the government not have to pay subsidy, sugar price will also be lower than the RM2.84/kg today," he said.

Gov't ignored analysts

In January 2013, the Ministry of Domestic Trade, Consumerism and Cooperatives said the government had signed a three-year deal to import raw sugar at US$26/100lb.

Pua, who had then issued a statement to criticise the agreement, pointed out that at the time, analysts had predicted a drop in raw sugar prices due to excessive global supply.

NONE"But this was ignored by the government, with then Deputy Minister of International Trade and Industry Mukhriz Mahathir (left)  telling Parliament that global raw sugar prices were expected to rise," he said.

True enough, Pua said, global sugar prices plunged to as low as US$16.70/100lb in September 2013, more than 50 percent lower than what the government was paying.

"(Mukhriz) last January arrogantly said: 'Let me remind you that the government is smart' by signing the three-year agreement. Today, it is proven that it was a wrong move that has hurt Malaysia," Pua pointed out.

He added that the government also needed to explain why it was importing raw sugar on behalf of sugar duopolies Malaysian Sugar Manufacturing Bhd and Tradewinds Bhd.

"Isn't it better for Malaysians if the companies are pressured to compete and not shielded by the government?" he asked.

Related stories

BN MP echoes Anwar's urging to end sugar monopoly

Aid to poor and disabled 'quietly cut' in Budget 2014

PM's Dept's huge budget justified, says Idris Jala

Now that Budget 2014 is tabled, what's next?

PKR: Sabah's needs ignored again in Budget 2014

New income tax structure savings won't offset GST

'Not too much to ask PM to change his lifestyle'

Customs Dept gets ready to implement GST in 2015