The state government of Sabah has announced a significant subsidy aimed at easing the financial burden on Sabahan students studying at higher learning institutions in Peninsular Malaysia, Sarawak, and Labuan. Chief Minister Datuk Seri Hajiji Noor revealed that a total allocation of RM10 million has been dedicated to providing air ticket subsidies, amounting to RM600 per student.
According to The Star, Hajiji made the announcement while visiting Penang, where he met with Sabahan students during a breaking-of-fast event. He emphasised that the subsidy, drawn from the Chief Minister’s special allocation, is a one-time assistance measure designed to directly benefit the students. (more…)
The Domestic Trade and Cost of Living Ministry (KPDN) in Malaysia has refuted claims circulating on social media that diesel subsidies for vehicles will be discontinued from January 1, 2024.
According to Bernama, in a statement issued on December 12, the ministry emphasised that the assertions were false and clarified that the ongoing pioneer project is specifically evaluating the effectiveness of the fleet card and MySubsidi Diesel systems.
The project involves six companies with skid tank quotas ending on January 14, and it does not impact individual diesel vehicles.
The ministry underscored the importance of testing the systems to ensure their efficiency and alignment with the planned objectives of restructuring diesel subsidies.
The ministry urged parties not to spread unclear or confusing statements and assured that an official statement regarding the diesel subsidy restructuring would be issued jointly by the ministry and the Finance Ministry after the completion of engagement sessions and a trial run of the fleet card and MySubsidi Diesel systems.
In 2019, under the Pakatan Harapan government, the ceiling price of RON95 petrol and diesel (Euro2M) were set at RN2.08 and RM2.18 per litre, respectively. The move was to shield the economy from the effects of high fuel prices which could cause inflation. The capping of fuel prices meant that when oil prices rose and retail prices should have been higher, the government subsidised the different to keep them at the promised levels. That cost hundreds of millions of ringgit a week at times.
After a new government took over without any general elections, the prices of oil fell quickly due to the global pandemic. So there was no need for any subsidies from the government as pump prices kept falling to very low levels.
Lower levels than before
But oil prices are now creeping up again, and pump prices are likewise increasing a few sen each week. Nevertheless, the government will still provide subsidies to maintain a ceiling price for RON95 petrol and diesel as before. However, the ceiling price per litre has been revised to a lower level – RM2.05 for RON95 petrol, RM2.15 for diesel.This was announced by the Minister of Finance this evening. He said the government remains committed to reducing the cost of living of the people and will always monitor the impact of changes in world crude oil prices.
“The government will also take appropriate measures to balance the government’s subsidy burden with the need to continue to preserve the welfare and well-being of the people,” he said, adding that the decision was taken based on the rising market price of petroleum products following the increase in world crude oil demand.
“It was also influenced by the reopening of various economic sectors around the world. Furthermore, the global oil price trend is also influenced by the COVID-19 vaccination plan which is starting to be rolled out gradually around the world,” he added.
Based on Automatic Pricing Mechanism
The prices each week are based on the Automatic Pricing Mechanism (APM) which takes into account various factors and is adopted by the government and industry. RON97 and RON100 petrol are not subsidized and generally follow global oil price trends while for Euro5 biodiesel, a 10 sen charge per litre is permitted at the pumps for the significantly cleaner fuel.
UPDATE AT 8:45 PM/June 10:
According to Bernama, quoting the Domestic Trade & Consumer Affairs Minister,
the government has not removed the ceiling prices.
When the Pakatan Harapan government was managing the country’s affairs, one of the things which it did for consumers was to cap the prices of RON95 petrol and diesel. Though the country didn’t have a lot of money and had massive debts due to the 1MDB scandal, the government was still willing to provide subsidies to maintain fuel prices when needed. The prior government had removed subsidies and allowed the Automatic Pricing Mechanism to determine weekly retail prices at the pumps.
The subsidies, though discouraged by economists because they can distort the market, helped to provide a degree of stability for businesses. Being able to make projections of future transport costs without worrying about fluctuations in fuel prices made planning less of a headache. It eased the burden on consumers already facing challenges of rising cost of living.
Change approved in April 2020
Now, under the present government, things have changed and they were done with no announcement (though through proper gazetting procedures). Apparently, the change was approved in April this year but we didn’t notice it because fuel prices had fallen very low (and people were more concerned about the MCO). It was gazetted at the beginning of this month.
There will no longer be any cap on RON95 petrol at RM2.08 a litre, nor on diesel at RM2.18 a litre. If global oil prices and other factors result in the Automatic Pricing Mechanism setting prices above those levels, they will be followed as there will be no subsidies used to offset the additional cost.
With the global pandemic forcing lockdowns that reduced demand for oil, prices have been sliding down since the beginning of the year.
No subsidies needed since February
For many weeks since February, no subsidies have been necessary as the prices kept going downwards. The last time subsidies were needed was the first week of February when the government pumped in RM10.43 million.
In early March, the prices of RON95 petrol and diesel dropped below RM2.00 and kept going down to as low RM1.25 and RM1.40 for petrol and diesel, respectively. However, by the end of May, the prices started to slowly move up again, with this week’s levels being RM1.48 and RM1.73, respectively. Still some way to go before reaching the previous capped levels but the trend seems to be upwards and oil output and demand begin to be more in sync.
The Petrol Subsidy Program (PSP) due to commence in January 2020 has been postponed. Apparently, according to the Domestic Trade and Consumer Affairs Minister, Datuk Seri Saifuddin Nasution Ismail, the decision to postpone had been made 12 days ago during a Cabinet meeting.
The reason given in a statement issued this afternoon by the ministry is to allow ‘fine-tuning of the implementation process’ by the Ministry of Finance. A new date of implementing the PSP has not been announced but in the meantime, more explanation and clarification will be made so as to ensure people fully understand the PSP.
The minister added that the postponement would also benefit eligible motorists who are registering for the PSP. As is well known in Malaysian culture, doing things at the last moment is a common bad habit and the Finance Ministry hopes this will make things less hectic for them to handle.
The postponement does not have any immediate effect for those who are entitled to receive subsidies since the mechanism would provide subsidies only once every 4 months. Eligible motorcycle and car owners in Peninsular Malaysia will receive RM12 a month and RM30 a month, respectively.
The dedicated site for registering for the PSP seems to be offline until tomorrow.
Meanwhile, all motorists purchasing RON95 fuel (to be upgraded to the Euro4M standard from this Wednesday) and diesel will continue to enjoy subsidies to maintain the retail prices at RM2.08 and RM2.18 a litre, respectively. Hopefully, the postponement also means that the plan to raise the petrol price by 1 sen each week until it reaches levels determined the Automatic Pricing Mechanism (based on factors that include global oil prices) will also be postponed.
The price of RON97 petrol, which is not subsidized, has been be determined by the Automatic Pricing Mechanism (APM) each week. RON100 petrol, available only from Petron, is not under any price control. The last price shown on its website was RM3.10 a litre.
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.
