Diesel subsidy rationalisation due to 10-fold increase in cost to Malaysian government: finance minister II

The decision to rationalise diesel fuel subsidy in Malaysia was due to the cost to the government, which had increased by 10 times in just five years, The Star reported.

The Malaysian government had paid RM14.3 billion in diesel subsidy last year, compared to RM1.4 billion in 2019, and leakages of subsidised diesel was identified as the main culprit for the significant increase in subsidy payments as the amount of subsidised diesel grew from 6.1 billion litres to 10.8 billion litres over the same period.

“One of the reasons to proceed with the subsidy rationalisation is to plug the fiscal holes. The focus now is on subsidy rationalisation so that the government can run effectively. A well-run government helps the people in other forms,” said finance minister II Datuk Seri Amir Hamzah Azizan.

The government hopes to save RM4 billion a year through the rationalisation of diesel subsidy, and savings from the exercise can then be channelled to other areas, according to the report.

The main reason for the leakage of subsidised diesel is the big difference in price of the fuel compared to those in neighbouring countries such as Thailand, Singapore and Indonesia. While the retail price of diesel in Malaysia is capped at RM2.15 per litre, the fuel costs RM4.12 per litre in Thailand, RM4.73 per litre in Indonesia and RM8.87 per litre in Singapore, The Star reported.

Earlier this week, the Malaysian government announced the Budi Madani subsidy assistance programme where successful applicants will receive RM200 a month for their diesel vehicles. The Budi Madani website came online shortly thereafter; here’s how to apply for the subsidy.

Meanwhile, the subsidised diesel control system 2.0 (SKDS 2.0) programme began in March this year, and five petroleum companies issued 90,000 fleet cards to eligible transport firms this week.

The SKDS programme is aimed at the logistics sector or those providing essential services to consumers, while Budi Madani is aimed at private owners of diesel vehicles and agricultural smallholders.The ministry of domestic trade and cost of living (KPDN) stated yesterday that those looking to receive diesel subsidies may apply for Budi Madani or SKDS 2.0, but not both.

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