Former economy minister Rafizi Ramli has cautioned that the government’s new targeted RON95 petrol subsidy, set to begin on Sept 30, could open the door to fuel reselling and other loopholes.
He said the scheme, which grants Malaysians who have a valid driving licence access to 300 litres of petrol at RM1.99 per litre per month, may not eliminate misuse.
“There is a possibility that new leakages will emerge.
“Those who do not need the full 300 litre quota may purchase at subsidised prices and resell it. Groups with unlimited access to subsidised petrol, such as e-hailing drivers, could also open up opportunities for leakages,” Rafizi said.
He, however, added that subsidy rationalisation is a necessary step for fiscal sustainability, stressing that wealthier households currently benefit disproportionately from the blanket scheme.
The Pandan MP said that without subsidy rationalisation, for every RM1 of subsidy spent, T20 households will receive 75 percent more than B40 households.
“The country is also vulnerable to volatile global crude oil prices. When crude rises above US$80 per barrel, the subsidy cost reaches RM20 billion annually; when it falls to current levels, the cost drops to RM12 billion.
“Each time oil prices spike, national finances are exposed. This is why most economists would agree that retargeting the RON95 subsidy is essential as part of economic reform,” he explained.
As the 300-litre quota is given to every individual regardless of financial standing, overall petrol consumption is also unlikely to drop significantly, Rafizi said.
“The government will still need to subsidise petrol down to RM1.99 per litre, so my rough calculation is that subsidies will still amount to RM10–15 billion annually in 2025 and 2026. Thus, the fiscal impact will not be as large as market analysts previously projected,” he added.
This morning, the government announced that it will not impose an income cap on RON95 subsidies, as it had previously indicated, when the targeted mechanism takes effect on Sept 30.
Instead, Prime Minister Anwar Ibrahim announced that all Malaysians with a valid driver’s licence can buy RON95 at RM1.99 per litre.
He also clarified that there will be a 300-litre-per-month ceiling, which e-hailing drivers will be exempted from.
Anwar said the ceiling was determined based on data from the Statistics Department, which found that the average Malaysian uses between 100 and 200 litres of petrol every month.
Foreigners driving locally registered vehicles, meanwhile, will pay the market price, estimated to be around RM2.60 per litre. Foreign-registered vehicles will still be limited to RON97.
Previously, Anwar said that the “mahakaya” (rich elites) would not be entitled to fuel subsidies.
Mechanism not fair, merely a cap
However, Rafizi explained that the new mechanism will not result in a fairer distribution of benefits, as wealthier households are still likely to gain more.
“Since wealthier households typically own more vehicles, and every adult in the household likely holds a licence and owns a vehicle, the total subsidies flowing to higher-income groups will still be larger than those for lower-income groups.
“From the perspective of subsidy retargeting, this approach does not actually retarget subsidies, but merely caps them,” he said.
Rafizi added that the real test of the new mechanism will be seen over the next six to 12 months, when its effectiveness in reducing leakages and ensuring fairer distribution can be measured.
He also emphasised that the policy is more of a subsidy cap than a full retargeting exercise, and acknowledged that questions of fairness and efficiency will continue to be debated as the system is rolled out.
More burden for the people?
Rafizi explained that the impact of the new scheme would depend on an individual’s place of residence and economic category.
“For residents outside urban areas (whether wealthy or not), it should reduce petrol costs slightly due to the six sen price drop, while usage patterns remain unchanged. The real impact will be on urban dwellers who tend to use more petrol for commuting.
“For an M40 household where both husband and wife work and use their own cars, if petrol consumption already exceeds 300 litres a month, this approach will mean higher monthly costs.
“For the urban upper class, there will also be an increase, but the financial impact on their household budgets will not be as significant as for the M40,” he added.
He also highlighted “trade-offs” such as diminished user experience at petrol stations, pointing out the possibility of long queues at payment counters.
“While there will be benefits, new complications may also emerge.
“The process is likely to take longer as motorists may need to queue at the counter, unless stations eventually allow licence verification directly at the pump,” Rafizi added. - FMT
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.