The government will introduce a targeted fuel subsidy

The government plans to implement a targeted fuel subsidy mechanism instead of the block subsidy currently enjoyed by Malaysians regardless of their socio-economic status. This is apparently necessary to cushion the impact of soaring crude oil prices for low-income citizens, according to Minister of International Trade and Industry Mohamed Azmin Ali.

Azmin said the government is still determining the structure of this new mechanism, as projections show that government subsidies are expected to reach RM28 billion for 2022, up from RM11 billion last year. In the last three months alone, Brent crude oil increased by 20%, partly due to Russia’s invasion of Ukraine, even causing airlines such as Air Asia to introduce fuel surcharges to compensate for soaring fuel prices.

“Those who have BMWs cannot benefit from the same subsidies as those who have Kancil,” the MITI minister said. Just a few days ago, Finance Minister Tengku Zafrul Aziz revealed that the most of the fuel subsidies actually go to the rich as for every RM1 of subsidy spent, 53 cents goes to the T20 group and only 15 cents is used by the low-income B40 demographic group.

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[Photo: anType Photography/Flickr]

Economic Affairs Minister Mustapa Mohamed has already announced last month that the government was working on a targeted mechanism to ensure that those who can afford fuel do not receive subsidies. For now, the government will continue maintain price cap of RM2.05 per liter for RON95 and RM2.15 per liter for diesel.

Questions remain over exactly when and how the targeted mechanism will be implemented, with neither minister revealing details. In 2014, the government proposed a three-tier system where full subsidy would only be given to those earning less than RM5,000 per month, while those earning less than RM10,000 would receive partial subsidy and those earning above that threshold would receive none . Theoretically, the system would be implemented using MyKad to confirm your eligibility when purchasing fuel, however, this system never materialized.

(Source: Bernama.)