Wednesday, June 04, 2008

UPDATE 3-Malaysia revamps energy price system, risks backlash

Wed Jun 4, 2008 7:58pm IST

By Soo Ai Peng

PUTRAJAYA, Malaysia, June 4 (Reuters) - Malaysia announced on Wednesday a broad overhaul of its energy price system, sharply raising fuel and gas prices but taxing palm oil and power producers in a move that would drive inflation to a 10-year high.

The reforms would save the government 13.7 billion ringgit ($4.23 billion) but risk further stoking public anger against Prime Minister Abdullah Ahmad Badawi, already fighting for his political survival.

Petrol prices would rise 41 percent to 2.70 ringgit a litre and diesel 63 percent to 2.58 ringgit from Thursday, Abdullah said, in a reform that would eventually lift Asia's second-cheapest pump prices to market rates.

Power distributor Tenaga Nasional's (TENA.KL: Quote, Profile, Research) tariffs would go up by as much 26 percent while the price of gas supplied by state oil firm Petronas [PETR.UL] to the power sector would be more than doubled, he said.

"We try our best," Abdullah told reporters in the country's administrative capital near Kuala Lumpur.

"This is not an attempt to be popular, we cannot satisfy everybody, naturally people will not be happy."

The government has said it plans to start using global market rates for fuel in August to prevent subsidies from eating up a third of its budget. Continued...