Electricity subsidy is wrong, Pun tells minister

Business leader Serge Pun weighed into the debate on the country’s energy tariff reforms at the Myanmar Global Investment Forum in Nay Pyi Taw on September 11, calling the electricity subsidy “wrong” and saying that the authorities are not pushing reforms due to “political sensitivity.”

“I think it [subsidising electricity] has always been a wrong policy.

“No one wants to touch this [issue of electricity pricing] because of political sensitivity.

“I have said many times that there is no reason our country is subsidising those factories and manufacturers [in the industrial estates]. It is fine for you to subsidise poor people; it is fine to give free electricity to schools. But there is no reason to sell electricity at this price to a manufacturer. But we don’t dare to do it [undertake the price reform]. We don’t dare to say ‘you have to pay the commercial rate.’ And therefore, we are still subsidising people who should not be subsidised,” he commented when answering a question from the audience.

“I hope the minister will support that view,” Mr Pun added, addressing energy and electricity minister U Win Khaing.

Myanmar’s electricity price, financially unsustainable and with rates being the lowest in ASEAN, remains unchanged despite years of deliberation. The residential rate is even lower. Currently, the wealthiest residents in Yangon purchase subsidised electricity below cost.

Jordan Zele, senior business development manager at Frontier Myanmar Research, told The Myanmar Times at a sideline interview that the electricity tariff needs to be reformed because the subsidy is “getting in the way of bringing electricity to the people of Myanmar”.

But Mr Zele cautioned that blanket policies are not effective and “simply raising the residential rates would not be wise”. “The political ramifications of this increase are a key barrier in stopping the government from reforming the tariff. A tiered system which charges higher consumers more would ensure that those Myanmar residents that cannot pay would still be protected,” he explained.

Government subsidies make it more difficult for a wide range of power projects to be commercially viable, ranging from large-scale LNG projects that will connect to the national grid, to small off-grid solar projects. The margin between what these projects can generate and how much they can sell the power for is squeezed further by the subsidy. As a result, projects that could help bridge the energy gap are failing to get off the ground.

At present, 60pc of the population in this country do not have access to the national grid, and are forced to resort to more expensive forms of power’s supply. These people are in effect subsidising the 40pc of Myanmar who do enjoy access to the grid. This minority who has access are typically wealthier than those without access.

But if segments of the population start paying a higher price for electricity, power projects will become more commercially viable and attract investments, he went on.

“As electricity becomes more reliable and widespread, more residents will be happy to pay for reliable electricity which will allow for further expansion of the national grid, and ultimately more people gaining access to electricity,” Mr Zele said.

Steve McBride, Parami Energy’s COO, said on the energy panel that the firm will “embark on an aggressive marketing strategy for LPG” in the country.

“I would question how much of a contributing factor the electricity cost actually is because in many Asian countries gas is a much preferred cooking energy. No doubt, though, in Myanmar currently, cost does play some role due to the relatively low level of incomes per capita,” he told The Myanmar Times.

Rural areas are largely unelectrified and hence subsidies are not relevant. On the panel on Tuesday, Dr Khin Maung Sint, Director for the Ministry of Natural Resources and Environmental Conservation, stated that 81pc of the population are burning wood and hence this serves as a target for the government to address.

LPG will contribute to protecting the environment, reducing usage of wood and tackling air pollution as well as public health, according to Mr McBride. “As reported by World LPG Association, 4.3 million people die globally every year from indoor air pollution, which is more than Malaria, HIV and Tuberculosis combined. Burning wood and charcoal are the primary sources of indoor air pollution,” he said.

The energy and electricity minister U Win Khaing pledged during the keynote address that the country aims to have 1 million households using LPG by 2020. Parami is “extremely capable of meeting or exceeding this target”.

Apart from seeing through actions on the electricity reforms, Mr McBride argued a formal LPG policy is needed to regulate the sector, and help the country “be assured of moving forward safely and positively”. “LPG is inherently a very safe and efficient fuel.”

In addition, director general of the MOEE’s electric power planning department Daw Mi Mi Khaing also said it is difficult to transport wind turbines due to the country’s road conditions, rendering wind power a difficult mission.


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