LAST_UPDATEWed, 20 Jun 2018 8pm

Fuel Prices Are Lower, But Is It Reaching Consumers?

SO after much speculation and misgivings, the managed float system for petrol was finally introduced in December last year followed by further reduction in the petrol pump price when the new year dawned. While consumers managed to save on fuel costs, all around, spiralling costs in daily consumer goods, utilities and housing continue to put a strain on every Malaysian’s purse strings.

So fuel is suddenly cheaper but why do price tags of goods remain unchanged? It didn’t take long for consumers to start asking if and when the price of goods and services can be reduced.  Many Malaysians still remember how quickly businesses responded with a round of price increases when petrol price was revised upwards in 2013.

Suddenly, we have many reasons coming from all quarters on the inability to revise prices from the impending GST implementation, complex cost structures and contractual costs.  Last week, the Petrol Dealers Association of Malaysia had highlighted that lowering fuel prices was driving many of its members out of business.

Whatever the reasons, it is clear that the price of goods and services is not going to come down anytime soon. Should we blame ourselves for the lackadaisical attitude to fight against this unhealthy lack of business ethics in the country? Or should we point the fingers to the government for the lack of law enforcement against profiteers for refusing to reduce the prices of goods and services?

Greedy profiteering or just market economics?

Datuk Paul Selvaraj is the secretary-general of the Federation of Malaysian Consumer Association (FOMCA)Datuk Paul Selvaraj is the secretary-general of the Federation of Malaysian Consumer Association (FOMCA)The Federation of Malaysian Consumer Association (FOMCA) secretary-general Datuk Paul Selvaraj (pix, left) told Malaysian Digest that he observed that whenever the prices of fuel went up, the business owners and service providers tend to increase the prices of goods, but the situation is reversed when there is a drop in fuel prices.

“Profiteering is unethical and the consumers have the right to fair pricing of goods and services. In order to keep errant traders from unfair profiteering, the government should step in and enforce the Price Control and Anti-Profiteering Act 2011.

“Instead of making additional profits by hiking the prices of goods, the traders must uphold business ethics and they should pass the benefit of falling fuel prices to the consumers. The substantial decrease [in fuel prices] should be reflected in the prices of goods, especially food and other essential items,” he said when contacted recently.

When asked his opinion on the managed float mechanism introduced by the government recently, he remarked, “While it is generally a good move for the government to implement targeted subsidies, but I think subsidies should not be for all. The government, at the same time, ought to make sure that people in low-income groups are not marginalized.”

Highlighting the burden of the people due to the higher cost of living, he continued, “The government should ensure affordable housing and efficient transportation since these are the major items for common household. In the long-term context, the government should ensure food affordability and security.”

“Since Malaysia depends heavily on imported food, we are vulnerable to food safety and supply problems as well as the fluctuating food prices,” he said.

“We will hand over a memorandum to Putrajaya soon with the hope that the government would strongly enforce the Price Control and Anti-Profiteering Act 2010, as we think that the benefit of falling fuel prices should be passed on to the consumers,” he added.

Business is still about supply and demand

Checks by Malaysian Digest showed the rise of vegetables prices between 15% and 50% in some states in the country recently with many of the vegetable sellers saying that they were struggling with factors such as erratic supply and transportation.

When contacted by Malaysian Digest, Federal Agricultural Authority’s (FAMA) Market Information Services Division senior director Dr Bisant Kaur (pix, below) said vegetable prices are generally determined by both the conditions of supply and demand and fuel or tansportation costs only makes up 5 to 10 percent of the total production costs. Dr Bisant Kaur is the senior director at Federal Agricultural Authority's (FAMA) Market Information Services DivisionDr Bisant Kaur is the senior director at Federal Agricultural Authority's (FAMA) Market Information Services Division

“In December last year, there was a sharp rise in prices, as floods in the East Coast exaggerated supply concerns, but prices have started to decline beginning 6 January 2015 after the earlier sharp increases.

“Vegetable prices tend to increase towards the end of the year, beginning November and tapering off after Chinese New Year, in reaction to increased demand during the festive seasons and year-end holidays,” she explained.

Asked what FAMA has done to deter errant traders especially in those states unaffected by floods, she said, “We are monitoring the prices of vegetables and fruits at various levels such as farm, wholesale and retail from time to time; it is our responsibility to do so and we see it as  normal routine exercise.”

“To monitor the prices closely, we have currently increased the frequency of collection [vegetable prices collection from markets nationwide]. Previously, we collected the prices twice a week but now we are doing on daily basis,” she said.

“These prices were collected at major wet markets in Malaysia. For instance, traders in Kuala Lumpur would refer to the prices in Chow Kit Market while traders in Kelantan would refer to Kota Bahru Market,” she said, adding that KPDNKK would fix maximum prices of selected vegetables during major festive seasons in Malaysia.

Meanwhile, Malaysian Digest had also obtained the price list of selected vegetables in Kelantan (flood-hit state) and Kuala Lumpur from FAMA (December 2014 and the 1st week of January 2015). Refer to the table below:

Source: FAMA / Malaysian DigestSource: FAMA / Malaysian Digest

Lower fuel costs not the only factor in the cost structure of goods and services

“RON 95 and diesel do not have a major direct impact on the cost of producing a plate of Nasi Goreng Pattaya, a glass of teh tarik, banana leaf meal, a plate of chee cheong fun or even that canned sardine.” according to Datuk Seri Hasan Malek, the Domestic Trade, Cooperative and Consumerism Minister as quoted in his written viewpoint in a local news daily last week.

The Minister had also urged consumers to lodge reports against profiteering eateries, rejecting the claims that the ministry has not dealt with this unethical business culture in media reports. He also said that his officers have conducted more than many spot-checks against rogue businesses in the past but did not inform if the profiteering offenders had been penalized.

Noorul Hassan Saul Hameed is the president of Malaysian Muslim Restaurant Operators Association (PRESMA) Noorul Hassan Saul Hameed is the president of Malaysian Muslim Restaurant Operators Association (PRESMA) In an interview with Malaysian Digest recently, Malaysian Muslim Restaurant Operators Association (PRESMA) president, Noorul Hassan Saul Hameed (pix, left) said the relationship between the fuel prices and the prices of food and beverage is indirect, dismissing the claims that mamak restaurants increased the price of their foods following the recent drop in fuel prices.

“We are the victim of profiteering too. The operations of our restaurants also depend on the suppliers, wholesalers and stakeholders. When they [distributors] do not bring down the prices, how people can expect us to reduce the prices of our food?” he questioned.

Noorul, however, said that their restaurants are prepared to reduce the prices of food if the relevant stakeholders such as suppliers and distributors also bring down the prices.

“There are no mamak restaurants in Malaysia which purposely increase or double up the food prices following the drop in fuel prices. If there is, I would say only a few of them. We can single it out easily.

“At the moment, we still maintain the prices of our food despite the fluctuating fuel prices. We have never take advantage of our customers in whatsoever ways. Our customers are the best judge, as they come back regularly.

“Even though the fuel price had just been reduced, it is still too early to speculate as the costs of other things are still on the rise,” he said, adding that customers can always lodge a report to the authorities concerned for any unethical business behaviour of restaurant owners.

Exercise your purchasing power, spend your money wisely and be a smart consumer – Hasan Malek

In his recent Facebook posting on 10 January 2015, Hasan Malek had explained that in a capitalist economy, government intervention in the form of enforcement of the Price Control Act is only when absolutely necessary on essential goods while the rules of supply and demand must be allowed to dictate all other goods and services from branded coffee to the latest communication gadgets or lifestyle trends.

Last Thursday, Malaysian Digest had also reported that the UMNO Youth deputy chief, Khairul Azawan Harun who expressed a need for a price check mechanism and an enforcement method in order to ensure that prices are set appropriately to help spearhead economic activity in benefiting the nation and the people. (Read here)

When contacted by Malaysian Digest, economic expert and lecturer of the Faculty of Economic and Business, Universiti Sarawak Malaysia (UNIMAS), Prof. Dr Shazali Abu Mansor (pix, below) shared the same sentiment, saying it is common in Malaysia when the traders are reluctant to bring down the retail prices of the goods. Prof. Dr Shazali Abu Mansor is an economic expert and lecturer of the Faculty of Economic and Business, Universiti Sarawak Malaysia (UNIMAS) Prof. Dr Shazali Abu Mansor is an economic expert and lecturer of the Faculty of Economic and Business, Universiti Sarawak Malaysia (UNIMAS)

“Instead of taking advantage of the current market situation [the drop in fuel prices], the traders must set the prices of goods accordingly. I believe, if they reduce the prices of goods in tandem with the drop in fuel prices, it would help to promote more sales.” he said.

Social media driven initiatives like #turunhargabarang and the pending submission of a memorandum by FOMCA to the Ministry are proactive measures that consumers can take besides exercising their economic power to try and bring down spiralling costs of goods and services. Clearly, without pressure from the public as well as lobbying from NGOs, no positive action towards price reduction can happen.

After all, as many have noted on social media discussions, the price of fuel will eventually go up again so what long term harm do businesses risk in passing on the cost-savings to consumers now when the price of fuel is low as they will surely raise their prices again when oil prices rebound.