Diesel subsidies a step forward, with room for improvement

ADUN SPEAKS | Soon after the Finance Ministry announced the implementation of the targeted diesel subsidy initiative on June 10, I received a lot of public feedback on this.

Maybe many reached out to me because before I was elected as an assemblyperson, I was involved in the plantation industry for many years.

As we know, the country’s plantation sector uses diesel heavily. A lot of machinery in plantation estates is diesel-powered like tractors, harvesters and generators.

In fact, under the government’s Budi Madani initiative, nearly 400,000 agro-commodity players qualify for the RM200 per month cash aid. This just shows how big an impact this policy has on the sector.

In my Jementah constituency and its surrounding areas, many are still involved in agriculture, including oil palm. Besides that, I also get a lot of feedback from other industries, like construction, tourism and fishery.

Subsidy rationalisation the right move

Broadly speaking, I feel that the targeted diesel subsidy policy is a good one, despite the mixed responses from the public on this. As announced by the Finance Ministry, the country spent over RM80 billion last year on subsidies.

Much of what we have spent did not end up with the intended recipients, such as those in the B40 and M40 categories. For example, due to cheaper diesel prices at the pump, a lot of it has been smuggled into neighbouring countries.

Before June 10, our diesel was selling for RM2.15 per litre, while in Singapore, it was around RM9 and in Thailand, RM4. This huge price disparity has incentivised smuggling activities.

Further, there’s also leakages in the form of certain industries using subsidised diesel, which they are not supposed to.

All these mean that the government has been subsidising foreigners and irresponsible parties. Finance Minister II Amir Hamzah Azizan has said that the targeted diesel subsidies policy will save the country RM4 billion a year.

We can do a lot with the savings, such as building more schools, hospitals, and roads and enhancing our social safety network by raising the budget for programmes like Sumbangan Tunai Rakyat (STR).

In the long run, our country cannot afford to continue with the bulk subsidies model. To be economically sustainable in the long term, we need to ensure that our subsidy spending reaches the intended group.

Cushioning the impact

In this respect, one must give credit to the Madani administration for introducing various initiatives to ensure that we can mitigate against the decision to float the price of diesel at the pump.

On top of the 400,000 potential recipients of Budi Madani under the agro-commodity segment, some 300,000 eligible private diesel vehicle owners also get a cash aid of RM200 per month from the government.

This is a form of subsidy to help the beneficiaries make up for the price difference at the pump after the float came into effect.

The government has also expanded the list of land transport vehicles eligible for fleet cards, which enable operators to continue purchasing diesel at subsidised rates. Those in the list include school buses, express buses, taxis and general cargo lorries.

In theory, when we manage transportation costs, we mitigate the risk of rising prices of goods and services. In other words, the decision to float diesel prices should not bring about inflation - at least on paper.

Theory v reality

As we know, what is good on paper may not always work in real life. Sometimes, some of the best and most well-intended plans get derailed by poor implementation.

As a state legislator, I get a lot of feedback from the ground. We cannot ignore some of the feedback we receive if we want to improve on the rollout of this plan.

For example, some planters and farmers have informed me that the RM200 per month Budi Madani cash aid is not enough. There are also some who do not qualify because their annual turnover exceeds RM300,000, the upper threshold eligibility for the aid.

As for fleet cards, a common feedback is that the monthly fuel quota they are allocated is insufficient. Tour bus operators also want to be eligible for these fleet cards.

Many smaller towns in Johor like Segamat, Jementah and Labis will be affected if local tour operators charge more for tourists, many of whom are our fellow Malaysians, to visit these towns.

Over the years, these destinations have carved a niche in areas like eco-tourism, culinary draws and cultural trails. A drop in tourist arrivals will have a spillover effect on jobs and the local economy.

Work in progress

We should take this feedback in our stride. For a national project of this scale, involving cross-agencies implementation with stakeholders coming from diverse backgrounds, teething problems like these are only expected.

What is important is that we look into this feedback honestly and where possible and necessary, offer remedies. More consultations with stakeholders can help enhance the delivery of this targeted subsidy policy. Improvements are a perpetual work in progress.

The government must be seen to be having its ears on the ground. We can ill-afford to let public misgivings towards this policy snowball into something bigger come the next general election.

All said and done, the targeted diesel subsidy policy is an important step towards ensuring the country’s long-term economic sustainability.

While the government has made efforts to mitigate the decision to float diesel prices, some are still falling between cracks in the system. Continuous stakeholder consultations and responsive adjustments will be vital to the success of this policy and maintaining public trust. - Mkini

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NG KOR SIM is Jementah assemblyperson.

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.