KUALA LUMPUR: The Malaysia Plastics Recyclers Association (MPRA) has expressed its concern about the impact of the revised electricity subsidy scheme on plastic recyclers.
MPRA secretary-general Datuk Johnson Yoon said the announcement made by the Natural Resources, Environment and Climate Change (NRECC) Ministry would negatively impact plastic recyclers and have a knock-on effect on local consumers.
"While we understand the rationale of the targeted subsidy scheme, we are very concerned about the impact of the drastic increase in electricity cost as it will not only have a negative impact on the plastics recyclers, but the increase will have a knock-on effect that would flow to local consumers as an increase in the cost of goods and services, and adversely affect exports.
"Electricity costs form a large portion of the plastics recycling manufacturing costs, ranging from 25 per cent to 30 per cent, depending on the type of production processes.
"The 20 sen per kilowatt hour (kWh) electricity surcharge or approximately 44 per cent increase in electricity tariff will translate into a net increase of between 14 per cent and 18 per cent in the plastics recycled resin manufacturing cost," MPRA said in a statement today.
The revised scheme would not increase electrical tariff surcharge on domestic and low voltage non-domestic users from January 1 to June 30, 2023.
The shift of the targeted subsidy would, however, result in medium voltage (MV) and high voltage (HV) industrial users having to pay an electricity surcharge of 20 sen per kilowatt hour (kWh) throughout the six months.
"We would like to appeal to the government for a more gradual surcharge rate to ease some of the cost burdens on industrial users and the consumers," said Yoon.
He added that the plastics recycling industry was very competitive, and most small and medium-scale enterprises (SME) plastics recycling manufacturers were operating at net profit margins of between three per cent to five per cent of their revenue.
He said such a drastic cost increase would wipe out these manufacturers' margins.
"Consequently, plastics recycling manufacturers will have no alternative but to pass on part of the cost increase to the end consumers.
"This will adversely impact local consumers in Malaysia and will also affect exports because the sharp spike in cost will render Malaysian plastics recycled products less competitive in the global market," added Yoon.
He also clarified that as the manufacturing process involves the melting/extrusion of plastic wastes and scraps, electricity consumption is invariably high and consequently.
"Even SME plastics recycling companies are affected, as these companies fall under the medium voltage category due to the power consumption level.
"This is contrary to the perception that SME companies were not affected by the increase in surcharge," he added.
He said recycled plastic resins were used in many electrical, electronics, and automotive sectors.
Recycled materials are also used for circular economy initiatives where brand owners are considering incorporating recycled materials in their products to meet global commitments to the circular economy.
"Therefore, the energy price increase will impact SME recyclers' operational costs and Malaysia's agenda for circular economy and EPR initiatives.
"Over the last two years, plastics recycling SMEs struggled to survive during the Covid-19 pandemic. As a result, businesses are just beginning to recover in 2022.
"The local business recovery process is therefore very challenging as apart from the increasingly difficult global market situation, manufacturers in Malaysia face various types of cost increases due to supply chain interruptions, rising raw material cost, minimum wage increases, and higher financial interest rates," he said.