Building materials, vegetables included in domino effect of diesel price surge

Costs are expected to rise in the construction sector after the 56% surge in diesel prices which has led to suppliers, wholesalers and eateries warning consumers of looming price hikes.

This follows the authorities' decision to deny subsidy compensation to tipper trucks, the main type of vehicle used in construction logistics.

Speaking to MalaysiaNow, an association representing commercial lorry operators in Johor whose main customers are construction companies questioned the exemption.

The Johor Sand and Granite Lorry Operators' Association, which represents more than 100 operators, said it had no choice but to raise prices to avoid losses due to the high cost of diesel, which rose from RM2.15 to a record RM3.35 on Monday.

Its president Frankie Chia said they were informed by the domestic trade and cost of living ministry of the decision to exclude tipper trucks from the various subsidy programmes.

"We asked them why tipper trucks are not in the subsidised category. They replied that the subsidies are only meant for the transportation of basic goods which are prioritised. Tipper trucks in the construction sector are not eligible," Chia told MalaysiaNow.

A tipper lorry has a rear platform that can be folded up to allow it to unload cargo. 

It is often used to transport construction materials such as sand, cement and bricks, as well as waste and recyclables.

The decision to exclude it from subsidies is likely to lead to a price increase in the construction sector as even those eligible for subsidies have warned of price hikes.

On the same day that the new diesel price came into effect, several hardware wholesalers and suppliers in Kuala Lumpur said they were forced to increase their prices as transport costs had risen by 25%.

A company supplying concrete and cement goods in Kuantan announced a price increase of RM12 for the delivery of each cubic metre of blended cement within a radius of 30km.

Chia said transport entrepreuners under his association could not give specific details on future price increases.

"It varies based on the company and location," he added.

Chia said he could not understand why the government was telling businesses not to raise prices following the decision to end blanket diesel subsidies.

He said the minister responsible should see for himself the reality on the ground.

"The minister should not just sit in his room. He should go and see for himself on the ground. We will even let him sit in the driver's seat so that he can see for himself," he said.

The expected increase in tipper tariffs is just part of a series of price hikes in the logistics and transport sector, where almost all vehicles run on diesel.

The result is a domino effect that is pushing up the prices of consumer goods and services, including food.

The various price hike notices that greeted the new diesel price are in contrast to Finance Minister II Amir Hamzah's assurance that commodity prices would not rise as a result of the cancellation of blanket diesel subsidies.

The government said there was no reason for dealers to increase prices as they could receive RM200 per month through the Budi Madani and fleet card programmes, to replace losses due to the subsidy removal.

Few details, inadequate payout

Lorry owner Muhammad Zulhilmi Abdul Latif from Ipoh, Perak, said he was still waiting to see if the subsidy compensation offered by the government would be enough.

Zulhilmi, who owns two lorries, said his application for the fleet card programme had been passed at the ministry stage.

Applications for the programme are made through fuel companies.

"In my case, I applied to Shell and have been waiting for the company's approval for two weeks now."

Zulhilmi said the approval would depend on various factors, adding that he was unsure how much diesel he would be allowed.

But based on the experience of friends who work with courier services, Zulhilmi said the amount was unlikely to be enough.

He said his diesel consumption ranged from 50 to 150 litres a day, depending on the distance travelled.

Zulhilmi transports corn and provides services for motorcycle towing as well as the moving of household goods.

He said he had had to increase his rates from RM2.50 to RM3.50 per km.

Meanwhile, many traders told MalaysiaNow that they were still in the dark about the fleet card programme.

Lau Sai Hoong, who represents lorry drivers transporting vegetables, said the lack of information meant that they could not guarantee the current price could be maintained.

"To date, the government has not given detailed information. There is no specific information on the amount of subsidy we will receive," Lau, chairman of the Cameron Highlands Vegetable Transport Vehicle Owners’ Association, told MalaysiaNow.

Currently, moving a tonne of vegetables from Cameron Highlands to Kuala Lumpur costs RM150 a trip.

Lau said one challenge for vegetable transporters is that they have to deliver even when the lorry is not fully loaded.

"People say that we can get RM1,500 if we transport 10 tonnes of vegetables. But that's not the case.

"We have to continue the journey even if the load is not full because vegetables are perishable," he said.