SINGAPORE: Savings of RM4 billion (US$ 847.8 million) from Malaysia’s diesel reforms will be used to fund public transport and cash aid, said Prime Minister Anwar Ibrahim, as the country puts a brake on subsidies of the fuel.
Speaking at the finance ministry’s monthly assembly in Putrajaya on Tuesday (Jun 11), Mr Anwar, who is also finance minister, stressed that the money gained from his recently announced plans to cut diesel subsidies would not go towards increasing the allowances of “ministers or other ministries,” and “will be channelled back to the people.”
“We must not be giving subsidies to the ultra-rich, large industries and foreigners … We are not discriminating against foreigners but they do not pay tax, and their levy tax is small. Therefore, our responsibility is firstly to our people,” said Mr Anwar, according to local media, adding that the savings would be directed towards initiatives such as Sumbangan Tunai Rahmah (STR).
The STR cash contribution provides financial assistance to Malaysia’s low and middle-income households. In his speech, Mr Anwar noted that the cost of the STR had risen to nearly RM10 billion as the number of recipients had reached nine million people.
Second finance minister Amir Hamzah Azizan, who was also at the meeting, had announced on Sunday that diesel subsidies for certain groups in Peninsular Malaysia would be discontinued starting midnight on June 10.
This, he said, would set the price of diesel at RM3.35 per litre according to the automated pricing mechanism, up from the current price of about RM2.15 per litre.
The Finance Ministry also said in a statement on Sunday it will begin setting diesel fuel prices to align them with market prices.
The latest announcements come almost three weeks after the prime minister’s May 22 special address, in which he announced the rationalisation of diesel subsidies for consumers across Peninsular Malaysia. Back then, he did not announce when the rationalisation would be implemented.
Those in the Borneo states of Sabah and Sarawak, where the use of diesel vehicles is widespread, would be exempt from the reforms, he said.
In his televised special address, Mr Anwar stressed that “any targeted subsidy should not burden the majority of the people.”
He added that the government would provide diesel subsidies to businesses that utilise select commercial diesel vehicles, including buses and taxis, and that certain eligible individual owners of diesel vehicles would be supported with cash handouts.
To ease the impact of the reforms, the government also introduced the Budi Madani cash aid programmes, where around 30,000 eligible recipients would receive RM200 in their respective accounts, according to the New Straits Times.
Malaysia has some of the cheapest petrol and diesel prices globally. The issue of rationalising fuel subsidies has been spoken about for almost two decades, but no government has had the political will to implement the plan, until now.
Mr Anwar has also stated that the reforms to diesel subsidies was the third government initiative implemented to restructure the country’s subsidy distribution system, following rationalisation of subsidies for electricity tariffs and sales of chicken announced last year. These are estimated to save RM4.5 billion and RM1.2 billion a year, respectively.
The moves come as part of a wider shift to move away from costly blanket subsidies.
“Blanket subsidies are more beneficial to the ultra-rich because their consumption or spending on goods and services is greater,” said Mr Anwar at his special address last month. “3.5 million foreigners also benefit from (them).”
