KUALA LUMPUR: The government should establish a new mechanism if it plans to reduce or remove subsidies for sugar producers as part of efforts to manage sugar consumption among Malaysians, said MSM Malaysia Holdings Bhd group chief executive officer Syed Feizal Syed Mohammad.
He told Business Times that implementing options like a price float or a revised controlled price ceiling should be evaluated before eliminating the subsidies.
Syed Feizal said the "war on sugar" campaign had been an interesting and "potentially impactful initiative.".
"However, implementing it requires a multifaceted approach. This could include series of public education and promoting a healthier lifestyle. Moderation in food intake is the key to a healthier life.
"With regards to the reduction or even removal of incentives for sugar producers as part of efforts to control Malaysians' consumption of the substance, it will require a new price mechanism such as a price float or a new controlled ceiling price.
"We are of the opinion that the best alternative without the incentive would be price float," he said.
He said that the sugar industry requires price normalisation due to high input costs, mainly raw sugar, freight, natural gas, and foreign exchange. Other input costs, such as packaging materials, wages, and inland logistics, have also remained elevated.
"Capping of sugar price without the present incentive creates a serious anomaly in the economics as explained in Parliament last year of refining losing RM 0.88 cents per kilogram (/kg).
"The retail prices of sugar in Malaysia of RM 2.85/kg are the lowest in the region against other Asian countries. As an example, Indonesia refined sugar retails at RM5.80/kg equivalent, while the Philippines is around RM9.00/kg," he added.
He further explained that currently, the sugar industry continues to receive a RM1/kg incentive for coarse grain sugar and fine sugar since November 2023, with MSM entitled to 24,000 tonnes per month.
Compared to the actual production cost, the incentive of RM1/kg is just breakeven to sustain the sugar industry's operation, he said.
"Meanwhile, the joint sugar industry actively ensures the necessary stockpile of refined sugar as part of food security and requires a fair price mechanism moving forward," added Syed Feizal.
The Health Ministry recently said that it is ready to discuss reducing subsidies for sugar producers to control nationwide consumption of the substance.
Deputy Health Minister Datuk Lukanisman Awang Sauni told the Dewan Rakyat that the ministry was ready to hold talks with the Economy and Finance Ministries.
Earlier, Muar member of parliament Syed Saddiq Syed Abdul Rahman suggested that subsidies for two sugar producers be removed, in line with Malaysia's effort to reduce sugar intake among Malaysians.