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10 APRIL 2024

Sunday, February 25, 2024

PM indicates targeted subsidies will be through cash transfers


Prime Minister Anwar Ibrahim has indicated that targeted subsidies to the public will be given through direct cash transfers to offset increased retail prices on goods.

The premier had said that this was being considered last year, but with targeted subsidies on fuel and other items expected to be rolled out in a couple of months, this appears to be the government's chosen route.

Speaking at a forum in Kuala Selangor today, Anwar said those eligible for subsidies would not be burdened by price increases as the extra money would be paid into their accounts.

"If say, we increase crude oil or cooking oil, if we increase it by RM2, we will not burden consumers. It means the B40 and M40 groups don't have to pay extra because we'll credit it to their accounts.

"Based on the amount of oil used every month, so from the Rahmah Cash Aid (STR), we will give RM20 (to B40 and M40). Don't worry, the oil price will remain the same for these groups," he was quoted as saying by Bernama.

Anwar reiterated this when speaking on fuel subsidies, which is a major source of leakages.

"If we don't change the way we give subsidies to help the people, (for example) in terms of fuel, let's say, for now, it's diesel, then it’s RON95 that we are providing (subsidies) for, 3.5 million foreigners also get government subsidies but they (foreigners) don't pay taxes.

"Then the super-rich also get (subsidies). I said, can't we think of another way, if the oil price rises by RM1, RM2 but we compensate (B40 and M40)... put (targeted subsidies) into the accounts of those from the B40 and M40 groups," he said.

Padu, use of MyKad

In January, the government launched the Central Database Hub (Padu) to allow the public to update their information - including their monthly income, household size, and financial obligations - as a prelude to giving subsidies on a more targeted basis.

Economy Minister Rafizi Ramli - who spearheaded the Padu initiative - has indicated that the targeted subsidies would be rolled out in the second quarter of this year.

The second quarter is from April to June.

Economy Minister Rafizi Ramli

Rafizi had said that with Padu, aid eligibility will be more nuanced rather than simply based on household income and family size, and could tackle problems such as urban poverty.

The government has been giving aid to low and middle-income households through direct cash transfers since 2012.

It has gone through multiple rebranding exercises and is currently known as STR.

The amount of aid, up to RM2,500 per year, is based on household income and number of children.

The Anwar administration introduced the Rahmah Basic Necessities aid (Sara) last year, which is now considered part of the STR aid.

Under Sara, eligible recipients get up to RM100 per month which can be redeemed at grocers to purchase necessities.

The redemption is made via MyKad.

Former Damansara MP Tony Pua - who was an aide at the Finance Ministry from 2018 to early 2020 - had revealed that the previous Pakatan Harapan government had considered using MyKads for targeted fuel subsidies as well instead of cash transfers.

He explained that this kind of subsidy system was preferable to direct cash transfers, as people always want to see subsidised prices at the pump, and would not remember that cash handouts were meant to subsidise petrol. - Mkini

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