PUTRAJAYA (May 31): The estimated savings of RM4 billion from the targeted diesel subsidy implementation are expected to give the government a larger fiscal space, in efforts to increase the quality of various services that are important for the people.

Finance Minister II Datuk Seri Amir Hamzah Azizan said that in 2022, RM81 billion was spent on subsidies and social welfare support, and the amount fell to less than RM70 billion last year.

“Therefore, if we allocated RM307 billion in the budget for operating expenditure, there would be less room to spend on more important matters for the future.

“The implementation of the targeted diesel subsidy is to ensure a larger fiscal space,” the minister said during an information session with senior editors at the Ministry of Finance recently.

Amir Hamzah said the savings could then be spent on managing the country, especially to improve services that the people require, including infrastructure such as roads and schools, as well as health-sector services, such as clinics and medicines.

“What we gain [from the savings] will be used to raise the [quality of] services for the people. If we do not implement [the targeted diesel subsidy], we will not have the savings, and it would be difficult for the government to improve services in the country,” he added.

Amir Hamzah said the targeted diesel subsidy will also be implemented using the best mechanism and emphasise the target groups that require assistance.

“We provide [subsidies] in the appropriate sectors, and the savings [we get] will be ploughed back into infrastructure, schools and whichever services that the government should implement. This is part of the [continuous] efforts by the government,” he added.

Explaining the targeted channelling of the subsidy called 'Budi Madani', he said this includes five areas — public transport, fishermen, selected commercial vehicles under the subsidised diesel control system (SKDS 2.0), individuals and farmers including smallholders.

Budi Madani will benefit 700,000 diesel vehicle owners in total, covering about half of active diesel vehicles in Peninsular Malaysia.

Of the 700,000 Budi Madani recipients, 300,000 of the diesel vehicles are privately owned, and the rest are commercial vehicles.

Since 2013, the Ministry of Domestic Trade and Cost of Living (KPDN) has led the governance-related implementation at a special price rate different from petrol stations’ retail pricing. This implementation used the SKDS 1.0, with fleet cards issued by oil companies involving 10 types of public transport vehicles.

Effective March 7, 2024, the implementation of this system was expanded via Phase 1 of the SKDS 2.0, covering an additional nine types of goods transport vehicles. This was expanded in Phase 2 of the SKDS 2.0,  involving an additional 14 other types of goods vehicles.

On Monday, the Ministry of Finance said the implementation of the Budi Madani subsidy assistance programme involves private diesel vehicle owners — for individuals, small farmers and small commodity farmers.

The Budi Madani programme complements existing government efforts to target diesel subsidies via the MySubsidy Diesel system operated by the KPDN. The SKDS is a programme under the MySubsidy Diesel system.

Under Budi Madani, cash assistance of RM200 per month is given to private diesel vehicle owners for individuals, small farmers and commodity smallholders.

Amir Hamzah added that according to a study by the Department of Statistics Malaysia, the monthly assistance is expected to be sufficient to cover the rise in diesel prices based on vehicles travelling up to 60km daily, thus meeting the needs of most individual diesel vehicle owners.

He said recipients of subsidised diesel, such as the logistics sector, hawkers and small traders, should consider the government subsidy as a trade-off, in order to not raise prices of goods and services.

"The government, together with the KPDN, will continue to intensify operations to curb profiteering," said Amir Hamzah.

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