The Malaysian Plastics Manufacturers Association has strongly disagreed with the recently announced 14% increase in the base electricity tariff by Tenaga Nasional Berhad which it said poses significant challenges to the plastics industry that is already grappling with mounting operational costs and economic uncertainties.

Raising tariffs for TNB's CAPEX is unwarranted it added, saying that the utility giant can support its business based on the  anticipated increase in electricity demand, especially from data centers and other high-consumption sectors, should be expected to generate higher revenue streams.

"These revenues should be sufficient to offset the rising CAPEX without imposing additional financial burdens on businesses and households. Furthermore, the argument for base tariff adjustments due to expected coal and gas price fluctuations is equally concerning" its President CC Cheah said.

He highlighted that the Imbalance Cost Past-Through (ICPT) mechanism was introduced to manage such cost variances. It is imperative that TNB utilises the ICPT mechanism to cover these fluctuations rather than passing them onto businesses through higher base tariffs.

MPMA further pointed out the plastics manufacturing sector's vulnerability to electricity cost increases. As an energy-intensive industry, most players in the sector operate on razor-thin profit margins of just 3-6%. Additional electricity costs would exacerbate the existing financial strain, jeopardizing the sustainability of an industry predominantly composed of small and medium enterprises (SMEs). SMEs, which constitute 90% of the plastics sector, are already dealing with numerous challenges, including:

Cheah said the cumulative effect of these pressures, combined with a potential rise in electricity tariffs, is too much for the industry to bear.
While MPMA said it acknowledges the ongoing liberalization efforts within the Malaysian power sector, it strongly urges the government to expedite the opening of the transmission and distribution segments to competition. In advanced economies like the United States and United Kingdom, competition in these areas has driven efficiency, reduced costs, and enhanced overall competitiveness. Adopting a similar approach in Malaysia would provide businesses with a more equitable and sustainable power supply framework.