Raising prices of fuel is never popular and in some countries where governments have done so suddenly, there has been public anger and even riots. In Malaysia, while RON97 petrol has not been subsidized for a while and has fluctuated according to global oil prices and the calculations of the Automatic Pricing Mechanism (APM), RON95 petrol and diesel have had their prices maintained through subsidies.
Come 2020, there will be a major change as the subsidies stop being available to everyone and the new Petrol Subsidy Program (PSP) is implemented. The PSP (only for Peninsular Malaysia) will be for some 2.9 million qualified motorists who will receive their subsidies at 4-month intervals from April 2020. The cost of the subsidies will be around RM65.4 million a month.
With subsidies removed, fuel prices will go up and this can be disruptive for motorists. So what the government plans to do is to increase the price per litre gradually. Currently, the plan is to add 1 sen each week and slowly bring pump prices to the level indicated by the APM.
The plan was revealed by the Deputy Domestic Trade and Consumer Affairs Minister, Chong Chieng Jen, who said it would reduce the burden on the public and prevent prices from spiking once subsidies are removed. The price of RON95 petrol will remain as RM2.08 a litre for Sarawak, Sabah and Labuan.
Subsidizing the retail price of fuel for motorists has cost the government millions – this week, the total cost amounts to RM101.52 million – and the money can obviously be better spent for other purposes. However, subsidizing fuel prices has helped not just those who really need assistance but also many who can afford to pay more for their fuel.
So over the past year, the government has been trying to find a way to target subsidies to make sure that only the groups that need fuel at subsidized prices get them. The approach has been finalized and announced today by the Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail. The planned implementation date will be at the beginning of 2020 so we should be hearing the full details from the Finance Minister in the coming Budget speech on October 11.
RM30/month for cars, RM12/month for motorcycles
Subsidies under the Program Subsidi Petrol will be given to eligible motorcycle and car owners in Peninsular Malaysia who are also registered for Bantuan Sara Hidup (BSH). Those with motorcycles will receive RM12 a month while those with cars will receive RM30 a month. The subsidies will be paid into bank accounts of the recipients every 4 months.
Among the additional conditions are that for cars, the maximum engine size to qualify is 1600 cc or if above 1600 cc, the vehicle should be over 10 years old. Some 2.9 million people will receive the subsidies which are expected to total around RM65.4 million each month.
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