KUALA LUMPUR (May 21): Putrajaya's plan to implement targeted subsidies will begin with diesel and involve only consumers in Peninsular Malaysia, according to Prime Minister Datuk Seri Anwar Ibrahim.
This was agreed to by the Cabinet, Anwar said in a televised broadcast on Tuesday night, and will not include Sabah and Sarawak for now.
“This morning, the Cabinet agreed to implement the targeting of subsidies on diesel. We are discussing the next steps,” Anwar said.
The rationalisation was meant to make diesel prices in Peninsular Malaysia to be closer to market levels versus its current subsidised price of RM2.15 per litre.
Watch: Diesel first on targeted subsidies plan
As for eligible individual owners of diesel vehicles, the government will support them with cash handouts, Anwar said.
Through this model, Anwar reasoned that both the B40 and M40 — bottom 40% and middle 40% income groups — will not be affected by the increase in diesel prices.
“Those who do not benefit from this targeting of diesel subsidies are the T20 and the 3.5 million foreigners in Malaysia,” he said, adding that pulling the diesel subsidies from these groups will save the government RM4 billion a year.
No implementation timeline was given.
As for excluding Sabah and Sarawak in the exercise, Anwar said this is due to differing consumer behaviours in East Malaysia.
"In Sabah and Sarawak, every family uses diesel for their vehicles, so we are delaying any [targeted subsidy] action [there] because it will burden the rakyat,” he said.
Open to challenges
Anwar said the unity government’s move to introduce the targeting of diesel subsidies is a “brave” one, and that it recognised certain quarters would be sure to have qualms about it.
“If you ask why it is necessary, [it is because] we cannot afford to subsidise the super-rich and foreigners. If there are those who choose to continue this policy [current blanket subsidies] that enriches the rich and foreigners, please go to the rakyat and let them choose," Anwar posed.
“Would they choose the policy that enables RM4 billion to be saved and channelled back to the rakyat, or would they allow that RM4 billion to continue going to the super-rich and foreigners?” he asked.
This subsidy rationalisation has been long awaited. Last Tuesday, Anwar told Bloomberg TV that the government planned to cut subsidies “at the right time, when we are fully prepared”.
In February, Minister of Domestic Trade and Cost of Living Datuk Armizan Mohd Ali said Putrajaya aimed to implement the diesel subsidy rationalisation by June this year, when he announced a fleet card system to be used to provide targeted diesel subsidies to eligible logistics players under a pilot programme dubbed SKDS 2.0. A total of 3,792 petrol stations and six goods transportation companies reportedly participated in the pilot project.
In April, Armizan called on logistics companies to apply for the fleet card to ensure they benefit from the targeting of diesel subsidies once the government implements it.