Myanmar’s regime on Monday stopped fuel supplies to industrial zones, potentially crippling the manufacturing sector, according to business owners.
The Union of Myanmar Federation of Chambers of Commerce and Industry in late November told factory owners to arrange their own imports.
Fuel prices have recently increased by at least 300 kyats per liter as the junta-controlled Central Bank of Myanmar (CBM) is unable to sell US dollars to fuel importers to enable them to make purchases.
The CBM pays importers at the official rate of 2,100 kyats per US dollar while the market rate is around 3,400 kyats. Fuel prices have gone up since early December as importers calculate prices at the market rates.
Factory owners said it is hard to import their own fuel and are negotiating with the Myanmar Petroleum Trade Association for help.
Manufacturing bosses submitted their estimated fuel requirements on Monday and were told they would be supplied on Friday or Saturday. It is unknown what charges they will face and if supplies will arrive.
Previously, factories in industrial zones paid 2,500 kyats per liter.
A factory owner at a Hlaing Tharyar Township industrial zone said: “If the petroleum association calculates the prices at the market rate, fuel will cost 500 kyats more per liter and production costs will increase by 20 percent. We won’t be able to make a profit and operations will be suspended.
“Electricity is unreliable and sometimes we have to use generators when the voltage falls too low,” he added.
Factory owners said retail prices will have to increase by up to 15 percent.
Yangon’s industrial zones have been promised at least eight hours of electricity per day but four-hour outages and brownouts, where the voltage drops, are common.
A garment factory with around 1,000 employees will currently spend around 20 million kyats per month on fuel, according to owners.
A clothing manufacturer said: “Conditions have become a lot harder and it is better not to operate. Production costs will only increase.”
Some independent businesses have already suspended operations due to power cuts and the difficulty with buying fuel.