Saturday 28 April 2012

No More Cheap Power To The People

Taiwan: Quick switch to energy-saving products
By Lee Seok Hwai, The Straits Times, 27 Apr 2012

TAIPEI: It's lights off when not in use or a NT$10 (43-Singapore cent) fine in Ms Wu Chia-pei's household, in anticipation of higher electricity fees next month.

The stay-at-home mother has also traded in her old refrigerator and washing machine for power-saving models. The thermostat for air-conditioning is set at 26 deg C.

'Two necessities have become more expensive at one go, but what can we do but adapt?' she told The Straits Times, referring to higher oil prices and an expected increase in electricity tariffs.

The government said the scrapping of oil and electricity subsidies is unavoidable in the face of rising coal, natural gas and oil prices. Almost all of Taiwan's oil is imported.

CPC Corp, the government-run oil company, incurred NT$38.6 billion in pre-tax loss last year. As of last month, Taiwan Power Company, or Taipower, a government-run utility and Taiwan's sole electricity supplier, had accumulated losses of NT$137.6 billion.

Fuel prices rose by an average of 10 per cent from April 2. Come May 15, electricity tariffs will go up by 16.9 per cent for households, 30 per cent for commercial users, and 35 per cent for industrial users.

Some eight million households, one million commercial clients and 210,000 industrial consumers will pay more, according to government estimates.

Electricity rates for Taiwanese households are the second-lowest in the world. After the adjustment, the rates will be higher than South Korea's but lower than Japan's, Hong Kong's and Singapore's.

'The days of cheap electricity are over, and Taiwan must face this hard fact,' said Economic Affairs Minister Shih Yen-shiang at a press conference to announce the hike earlier this month.

Families and businesses have wasted no time in adapting, with some companies adopting austerity or innovative measures one or two years ago in anticipation of the hikes.

FamilyMart, a convenience store chain with nearly 3,000 outlets across Taiwan, is installing a 'power management' system that will help reduce electricity consumption by up to 8 per cent, spokesman Yang Sung-chun told The Straits Times.

Staff will be instructed to switch off unnecessary lighting after 10pm, and signboard illumination during the day.

Restaurant chain Wang Steak, which has almost 200 outlets, said it has been using LED bulbs and lots of glass in its new outlets to let in natural light. Spokesman Huang You-hsi said the company has no plans to increase menu prices yet.

The Regent, a five-star Taipei hotel, is using diesel-powered generators to heat water supplies and swimming pools, and has switched to LED bulbs. Its chefs buy seasonal fish directly from fishermen.

Like Wang Steak, it is choosing not to raise prices for now, said its spokesman Chang Chun.

But some industries may have no choice but to charge more. Mr Yao Ta-kuang, chairman of the Taiwan Travel Agent Association, said the daily rental fee for a tour bus could rise by as much as NT$1,000, while fees for inbound travel groups could go up by 5 per cent.

Taiwan's Directorate General of Bud-get, Accounting and Statistics has said fuel price hikes could possibly push inflation past 2 per cent this year.

For the Taiwanese, whose salaries have not budged for more than a decade and whose average real wage is lower than it was 13 years ago, it is a bitter pill to swallow.

Already, department stores like Sogo have seen sales of luxury goods dip by about 10 per cent to 20 per cent.

Major retailers like PChome are reporting brisk sales in household necessities, including toilet rolls, diapers, bathing and cleaning products, as consumers stock up in anticipation of price increases, reported the Taiwanese media.

Reports on imminent price hikes on everything from cosmetics to betel nuts are rife. The Cabinet has convened a committee on stabilising prices to crack down on price fixing and hoarding.

To help businesses cope with the rise in costs, the government will issue up to NT$100 billion in low-interest loans to help companies and factories switch to energy-saving equipment.

The Taiwan Institute of Economic Research (Tier) this week lowered its forecast for gross domestic product growth this year from 3.96 per cent to 3.48 per cent, on its weak export outlook amid global economic uncertainty.

Tier president David Hong said the looming electricity rate hike was factored into the assessment, but it was hard to predict the extent to which prices and consumption patterns would be affected.

Still, Macroeconomic Forecasting Centre director Gordon Sun said the drastic hikes were for the best. The short-term impact on the economy will be harmful, but they will be beneficial in the long term, he added.

Indonesia: Plans to curb use of subsidised fuel out next month
By Zubaidah Nazeer, The Straits Times, 27 Apr 2012

JAKARTA: Indonesia's President has dispelled uncertainty over whether the restrictions on consumption of subsidised fuel would go ahead, saying plans are ready and will be announced next month.

Mr Susilo Bambang Yudhoyono also instructed ministers and regional heads to cut spending and improve efficiency to stem a budget deficit due largely to the rising cost of crude oil that has pushed up the budget for subsidised fuel.

In a speech at the opening of an annual meeting on national development planning yesterday, he said there was a need to 'significantly' reduce the consumption of subsidised fuel, increase state revenue and improve efficiency to save costs.

'The policies and action plans I have listed out will be ready in May, and I will announce details and explain to the people of Indonesia to get their support and cooperation,' he said.

This move is seen as crucial, as soaring crude oil prices have caused the budget deficit for this year to be revised upwards from 1.5 per cent of gross domestic product (GDP) to 2.2 per cent.

But the World Bank, among others, has warned that market conditions could see the figure bust 3 per cent, a cap mandated by Indonesian law.

The indecision over the removal of fuel subsidies has cost Indonesia a delay in an anticipated upgrade of its credit rating by Standard & Poor's (S&P), following similar moves by Fitch and Moody's. The two rating agencies had earlier placed Indonesia on investment-grade status - for the first time in 13 years.

S&P said it was delaying its upgrade for Indonesia because of 'policy slippages'. It added: 'The abandonment of a planned electricity tariff rise, the inability to implement fuel subsidy cuts despite rising oil prices, and a host of proposed or actual policy measures in industry and trade, point to rising policy uncertainty.'

Economists have long called for the removal or reduction of the subsidies, saying this was necessary to boost much- needed funds for infrastructure, social and education spending.

Indeed, the government had tried to do so. It proposed to raise the price of subsidised fuel by 33 per cent, from 4,500 rupiah (62 Singapore cents) a litre to 6,000 rupiah, from April 1.

However, it was forced to back down in the face of large-scale protests across the country, some of which turned violent, resulting in injuries and arrests.

Parliament then approved a hike, provided the average Indonesian crude price rises 15 per cent above US$105 a barrel over a six-month period. This may happen as early as next month, should oil prices continue to rise.

Already, the price of non-subsidised fuel has crept up to more than double the price of subsidised fuel, or up to 10,400 rupiah per litre.

In recent days, Indonesian ministers have been pushing forward a plan to ration the consumption of subsidised fuel to keep it at 40 million kilolitres, as provided for in the state budget.

Ms Evita Legowo, director-general of oil and gas at the Ministry of Energy and Mineral Resources, told reporters one measure would be to disallow cars with an engine capacity of more than 1,500cc to use subsidised fuel.

Dr Kurtubi, an energy analyst who is also the director of the Centre for Petroleum and Energy Economic Studies, was supportive of the measures to improve efficiency and reduce some state spending.

However, he warned that any measures to reduce consumption of subsidised fuel have to be implemented well in order to prevent inflation, a likely occurrence if the price of fuel rises.

'The government should look at improving the infrastructure to increase the supply of gas as a means to power vehicles, as this is cheaper than using fuel and has a lower risk of inflation,' he said.

He estimates that if all public transport and half of all private cars were to switch to gas, there could be savings of 100 trillion rupiah yearly.

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