The federal government and Petronas, both of whom advocate subsidy cuts for ordinary people, should do away with gas subsidies given to independent power producers (IPPs) and supply more gas to industrial sectors across the country, including Penang.

lim guan eng interview 290408 02 Penang Chief Minister Lim Guan Eng said that the federal government could save an estimated RM13.7 billion yearly by doing away the IPP subsidies.

The money, said Lim, could be channelled to provide more incentives and supply more gas to boost the industrial growth in all states.

Industries derive energy sources from fuel, electricity and natural gas but the sector did not receive much subsidy from the federal government or steady gas supply from Petronas. This has proved to be detrimental to industrial growth.

Penang recently lost a RM1 billion investment when the potential investor found that the Petronas pipeline supplied no gas to industries in the state.

The gas pipeline running from a Petronas plant in Terengganu to Port Klang, cutting through Perlis, Kedah, Penang, Perak and Selangor, was found to be not functioning.

Referring to this, Lim called on the national oil company to put its priorities right.

"Instead of supplying so much gas and providing subsidies to IPPs, Petronas should divert the supply to industries across the country to benefit the whole country," he said.

Petronas supply 65 percent of its gas to Tenaga Nasional and IPPs, and the rest to various sectors, but Lim wanted supply to IPPs to be cut down and diverted to all states.

Resulting from the recent subsidy package announced by the federal government, petrol price has gone up by 41 percent, diesel 63 percent, electricity 26 per cent and natural gas between 129 percent and 187 percent.

Industrial crisis

Penang government's industrial relations head Jeff Ooi was critical on the government ignorance towards the plight of industries in wake of energy cost hike.

He proposed tax incentives and subsidised energy supply for them as measures to combat high production and operation costs.

"The government focused on individuals such as vehicle users to provide incentives while neglecting the all-important industrial sector," he said.

Industries are the biggest contributors to the country's GDP and employees to millions of Malaysians.

Jelutong MP Ooi - also the Penang Chief Minister's chief-of-staff - cautioned that foreign and local investors could move elsewhere if they found it going tough due to rising cost.

A factory with 200 employees in Penang has forecast a RM42 million cost increase this year due to the energy hike.

Citing this, Ooi warned of an industrial crisis if the federal government did not act fast to curb the problems, such as by providing immediate subsidies.