Get going on old plan for targeted fuel subsidies, says economist

 

A new subsidy plan for fuel will help the less wealthy but petrol dealers might suffer, according to their association.

GEORGE TOWN: The government should get going with its plan for targeted fuel subsidies which was hatched 10 years ago, says an economist, amid fears over the rising costs of subsidies.

Universiti Tun Abdul Razak economist Barjoyai Bardai said disputes over the subsidy mechanism had held back the plan, particularly over who qualified for the fuel subsidies based on engine capacity.

“We have also learned that the government developed an app to target the fuel subsidies better, but there was a snag. Now we hear the government is eager to implement this plan.

“So I say let’s get the right people to select the right mechanism and app to get things moving,” he told FMT.

Barjoyai Bardai.

His remarks come in response to finance minister Tengku Zafrul Aziz’s recent statement that a targeted subsidy scheme was being considered as the cost of subsidies, at almost RM30 billion, was too much for the government to bear.

Barjoyai said targeted fuel subsidies would help fuel prices ride out fluctuations in the prices of crude oil.

When crude prices were low, he said, the government would be able to use excess funds to subsidise everyone, and when oil prices went up, it would subsidise only those deserving.

“In essence, the government would be able to cross-subsidise everyone regardless of income or engine displacement,” he said.

However, the Petrol Dealers Association Malaysia said there would be a sharp drop in sales if targeted subsidies were introduced.

The association’s chief, Khairul Annuar Abdul Aziz, said petrol kiosks might have to close, as their business was based on volume.

Khairul said the new mechanism should be fair not just to end-users but also to suppliers as they begin to recover from the effects of the pandemic.

“In the event fuel prices go up, we could be in financial ruin due to a drop in sales and higher costs from evaporation losses and credit card charges,” he said. “The worst off would be stations selling higher-grade fuel as it would take months to sell them off.”

Khairul said targeted subsidies would drive up inflation and cause delivery rates to go up.

He said the fuel prices should be gradually increased, instead of a jump, and all forms of subsidies should be given as cash aid directly to affected persons.

“We hope the government can sit down with us dealers to talk about the impact as soon as possible,” he said. - FMT