Subsidy?

Subsidy? What subsidy? Aiyah, I don’t understand-lah… by Anil Netto

(First published in http://anilnetto.com)

For the last few days, I have been trying to figure out what exactly this oil “subsidy” is that the government is talking about, which it cannot tahan any longer and so it has to collect more money from the people.

What exactly is this “subsidy”? Everyone is talking about it without really knowing what this subsidy is all about.

Who is paying this “subsidy” to whom? I mean, actual cash payment. Is Petronas actually paying cash to anyone for this “subsidy”? Is the government paying cash to Petronas?

As a trained accountant, I hate to admit it, but I still don’t understand what this subsidy is all about. Aiyah, accountant cannot understand subsidy, susah-lah like that. Maybe it’s a good thing I am no longer working as one!

So last night I asked an experienced lawyer, “Who exactly is paying this subsidy to whom?” – and, guess what, he didn’t know either. This morning, I asked an operations director of a foreign multinational corporation, a trained engineer, the same question – and, guess what, he didn’t know either. I feel better now – the lawyers and engineers are equally confused!

But everyone is talking about this “subsidy” thing as if they know what it is all about. Is there anyone actually handing a cheque or making a bank transfer to anyone and saying, “Here, this is your subsidy payment”?

Of course, this subsidy could merely be a “notional subsidy” or “opportunity cost” – which would be the revenue that is being lost because the oil is being sold locally at less than the global market price. In other words, extra revenue that could have been earned – and put to good use – has been lost.

Let us remember that even at the old “subsidised” or discounted price, Petronas made more than RM40 billion in profit before tax for the half year to Sept 2007. So mana sakit? If Petronas can make huge profits based on the old prices, why the need to raise prices by 40 per cent at one go? (You want extra cash after squandering all our oil money in the past, izzit? Just say so.)

Being a major commodities exporter and net exporter of oil, the country should be flush with funds as a result of soaring commodity prices, no? How are other oil-producing countries able to offer lower oil prices for their people?

If you really need to increase the price to be closer to market price (to encourage conservation and to use the extra revenue to assist the poor), why not a gradual increase, spread out over a few months? Why the desperate urgency? Why disrupt the national economy and burden the lower-income group with one fell swoop?

If Petronas really needs more profits, why not start by raising the price of the natural gas that it sells to the Independent Power Producers, which have made massive profits over the years at the expense of Tenaga and the people? These IPPs are still getting a “subsidy” compared to other industrial users, even with the new higher prices.

republished with author’s permission

Petronas’ RM600 billion profit

Petronas’ RM600 billion profit: Where has it all gone? by Anil Netto

first published in http://anilnetto.com on 3rd June 2008

So the figure has been revealed. Petronas’ group profit before taxes, royalties, dividends and export duties amounted to RM570 billion for the period from its establishment in 1974 to 31 March 2007.

If you include the figure for the period until 31 March 2008, then you are probably looking at a figure closer to RM700 billion, with the higher oil prices.

Let’s see the breakdown of that RM570 billion:

 

Payments to the government (royalties, export duties, taxes and dividends) – RM359 billion

Allocations for shareholders, royalties and taxes abroad – RM41 billion

Profits re-invested in Petronas operations – RM170 billion

Total RM570 billion

(In case you are wondering where I got these figures from, they are from an oral response in Parliament to a question put forward to the Prime Minister by the MP for Bagan, Lim Guan Eng.)

So the government has received RM359 billion from Petronas over the years. If we include the year ended 31 March 2008, the figure would be in the RM400 billion range.

The big question is, has the government made the best use of all that money? You and I know the answer to that. If the money had been used effectively, we could have provided affordable housing for everyone in this land, invested in an excellent public transport system and come up with a first class public health care system providing universal access to all Malaysians.

But have we? Look how much has been wasted and squandered over the years. Think of all the natural gas subsidies dished out by Petronas to the Independent Power Producers (private electricity companies), which have been raking in billions in profits over the years. (And now they want to reduce the subsidies for ordinary Malaysians.) Think of the billions spent on bailing out banks. And remember the colossal sums spent on building Putrajaya, building the Twin Towers, hosting the Malaysian Grand Prix, sponsoring the  Petronas racing teams and setting up the Malaysian Philharmonic Orchestra. All this while there are people without homes of their own, without a balanced and nutritious diet, without electricity and water in rural schools…

It is truly a lost opportunity, considering that we will soon become a net importer of oil in a few years’ time.

Meanwhile, ordinary Malaysians have no access to Petronas’ detailed accounts. Where is the accountability and transparency in the use of these massive amounts of public funds?

republished with author’s permission