20 sen increase
1. The government allowed the retail price of sugar to increase by 20 sen (+14%), from RM1.45 per kg to RM1.65 per kg in the Malay Peninsular with effect from 1 January 2010. A corresponding increase in Sabah and Sarawak pushed the said price to RM1.75 per kg. The reason given was a significant increase in price of the raw commodity in the global market.
2. It was true that the imported price of the raw commodity had jumped by 38%, from 95.8 sen per kg to RM1.32 per kg between 2008 and 2009. Hence, it is noteworthy to emphasize that the retail price increase was only about a third of that of the raw commodity.
3. The average rakyat / consumer, however, is worried that the hike would lead to a spiral increase in prices of sugar-based products
4. Reactively, the minister in charge warned the business community not to increase their prices indiscriminately. It was reported that he got the assurance from the food and beverage manufacturers as well as the restaurant operators that they would not raise their prices following the 20 sen increase.
5. Better save your breath. The following day, his own deputy minister claimed that the price of a cup of coffee had increased to RM1.00. The price of a famous brand bread was immediately hiked from RM2.00 to RM2.30; a 15% jump. Mathematically, it means, the sugar input in a cup of coffee and a loaf of bread is a kilo or more! However, the minister still tries his best to defend the increase.
6. Please don’t blame the rakyat if they wonder whether he is working for whom? For CONSUMERS as the name of his ministry’s suggest or …? He ought to be reminded.
Lesser sugar intake?
7. Unfortunately, some apologists had confidently commented that this price increase may lead to lesser sugar intake and, therefore, may lead to a lower potential of sugar-related diseases. Is this optimism realistic? Do they ‘mudah lupa’ (forget easily)?
8. Longitudinally speaking, the retail price of sugar had gone up over the years. Yet the sugar import had also gone up. Hence, it proved that sugar consumption had indeed increased correspondingly. Let us now turn our attention to cigarette smokers. Do their numbers decline drastically after numerous price increases?
9. The real issue behind this saga is the rich-biased policy, which is, continually protecting big businesses. I have singled out this problem in the Senate since December 2008 and I have written the same in my blog.
10. Accordingly, the minister ought to be reminded about the following naked facts contained in the Finance Minister’s 2010 Budget speech:
• in 2010, the Federal Government revenue is projected to fall by 8.4% to RM148.4 billion as compared to that of 2009.
• allocation for the same year had to be reduced by 11.2% to RM191.5 billion as compared to 2009, and still causing a huge current account deficit of RM43.1 billion.
• the deficit needs to be reduced by increasing the revenue and eliminating wasteful expenditure such as sugar subsidy; hence translating the concept ‘value for money’.
• not just for petrol, the approach of giving subsidy to ONLY targeted groups will also be adopted for other commodities.
11. Logically, the minister should be in tangent with or be in the right mode as that of his boss.
12. One wishes to remind yet again of the following stark statistics and, accordingly, revisit policy on sugar subsidy. The said subsidy must be restructured by giving only to the targeted group, THE POOR; not to the entire nation as had been practised for umpteen years.
13. The minister has to help his boss to walk the talk. As a reward, he could remain long enough on the chair. As it is now, he is (mis) construed as the spokesman of the rich.
14. On the outset, the minister must explain the huge 113 sen (86%) difference between the sales price (245 sen, including subsidy) and its basic input price (132 sen). Theoretically, one understands the various costs involved. Based on the principle of transparency, the rakyat / consumers have the right to know the actual scheme of things.
15. Now let us scrutinize these statistics. For the first 10 months of 2009, according to the Department of Statistics (DOS), total sugar (production + import – export) in the country was 2,410,273 metric tons. At a rate of 80 sen per kg, the total cost of sugar subsidy was RM1.93 billion! For one whole year, it would cost around RM2.3 billion!
16. Who largely expropriated this RM2.3 billion? The poor rakyat?
17. Firstly, the poor only constitute 3.8% out of 27.73 million people in 2008. Inversely, the rest (96.2%) were not poor.
18. According to The Household Expenditure Survey conducted by DOS, total sugar consumed by households was only about 72.1 million kg per year or only 2.6%. Admittedly, most of that sugar (roughly 69.4 million kg) must be consumed by the non-poor (96.2%) while the poor only consumed 2.7 million kg (3.8%)!
19. Nonetheless that amount is paltry since the lion’s share (97.4%) is consumed by the industry such as soft drinks, chocolate, bakery and confectionery, hotel, restaurants and coffee shops.
20. If the sugar subsidy is only meant for the poor (using the SUBUR approach, provided the database is comprehensive and current and implemented fairly), as mentioned by the PM cum Minister of Finance, the total cost of sugar subsidy will be RM2.16 million ONLY!
21. The rich can surely pay the additional 80 sen – RM1.60 a month since the average household consumption of sugar, according to the minister, was only 1 – 2 kg per month.
22. Even if the whole households are given the subsidy, the total cost would still be minute, only RM57.7 million (2.5%) as compared to the current total cost of RM2.3 billion.
23. The colossal saving could be used for other productive purposes, especially towards increasing the rakyat’s disposable income. The actual increase in real disposable income would make the rakyat happy since they could enjoy higher standard of living.
24. The PM has realized this huge potential benefit. Can the relevant minister quickly absorb and act on it? Can Dato’ Sri Ahmad Husni, MK II give a helping hand?
Note that my article above appeared in The Malay Mail today.