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Tuesday July 20, 2010
Why subsidy cuts should not raise prices
By P. GUNASEGARAM
There are ways that the tiny increase in costs can be managed to avoid any change in the prices of goods sold.
I HAVE a problem whenever I go for my teh tarik. I just simply cannot get them to reduce the sweetness to the appropriate level. First, it was kurang manis, then it was kurang, kurang manis, now it is kurang, kurang, kurang manis, but it still does not work.
Perhaps it is because they use condensed milk, which has loads of sugar in it and you need enough of it to give teh tarik the right colour – the rich reddish, brown colour of Klang River after a storm.
I have resorted nowadays to asking for teh si kosong, which is tea made with evaporated milk, the kosong indicating that no sugar is to be added. The results have been favourable.
What’s the point of all this? There is a sugar surfeit in our coffee shops and tea stalls. They are quite happy to fill your drinks with sugar to the brim, figuratively speaking, even if you insist you don’t want it too sweet.
The implication is that they can cut the increase in the cost of sugar by just reducing the amount of sugar proportionately – and we, the consuming public, will readily welcome it, as our repeated pleas for kurang manis fall on deaf, or rather un-listening, ears.
Let’s look at the figures. The price of sugar has gone up 25 sen to RM1.90 per kg, an increase of just over 15%. Given that there is so much sweetness in our food, all one has to do not to suffer from the sugar price increase is to cut usage by roughly about a seventh.
I will be more than happy if my cuppa had a seventh less sugar, or for that matter, I would be very happy if any other product that contained sugar had its content reduced by a seventh too.
Condensed milk manufacturers can cut sugar content by a seventh and so can soft drink manufacturers and, in the process, they will have products which are less harmful to health.
The pleasing and palatable conclusion from this is that the increase in the price of sugar need not at all result in the price of products containing sugar increasing if we just simply cut the amount of sugar in them by the same amount.
Unfortunately, the results are not as good for the other products, basically fuel, on which subsidies have been reduced.
But still most, if not all, of the cost increases as a result of this can be mitigated by taking other measures because the increases have been so small.
Let’s start with RON 95 petrol. Most cars can use this quite safely.
The increase in price was five sen to RM1.85 a litre. That is an increase of a mere 2.7%. For most people, intelligent driving such as not accelerating sharply, switching off if idling for more than a minute, inflating tyre pressure to the correct level, maintaining vehicles in proper condition etc, will easily bring about a saving of 2.7%.
The same applies for RON 97 petrol and diesel.
If all that is not possible, then the average person using a vehicle can reduce the usage of the vehicle by 2.7% by perhaps walking short distances, for instance.
A list of fuel-savings tips can be found at http://www.ehow.com/how_4475965_fuel-fuel-saving-driving-techniques.html. Most of us can adopt some of these to our needs.
What about public transport, you ask. Diesel prices have gone up a slightly higher 2.9% and therefore the same arguments would apply. The other thing that people like express bus operators will benefit from is to ensure their drivers keep within speed limits.
Ask anyone who drives on the highway and they can tell you a hair-raising tale or two about express bus drivers and the speed at which they drive. Someone should tell them that express does not mean exceeding the speed limit and driving recklessly.
Besides improving the safety record, driving at lower speeds significantly reduces fuel consumption and I dare say if express buses kept to their speed limits they will save at least 3% of their fuel costs and hence completely mitigate the increase in fuel prices.
The point then is that not only are the price increases very little for fuel, there is plenty of potential for full cost recovery by other means.
Whether it is sugar or fuel, what the authorities must take note of is that there is absolutely no justification for anyone to increase prices based on these subsidy reductions.
Of course, there is no assurance that will be the same for future subsidy cuts, but for now, there must be no price increase and the authorities must ensure that. Any attempt at profiteering by unscrupulous traders must be instantaneously cut.
> Managing editor P. Gunasegaram is eagerly looking forward to a less sweet glass of teh tarik some time soon.