KUALA LUMPUR (June 9): The government has set the pump price of diesel at all retail stations in the peninsula at RM3.35 per litre, up RM1.20 from Monday (June 10), said Finance Minister II Datuk Seri Amir Hamzah Azizan on Sunday.
However, the retail price of diesel fuel for Sabah, Sarawak and Labuan remains at RM2.15 per litre.
The sharp rise in diesel’s pump price is part of the Madani government’s subsidy rationalisation exercise. The government had last year introduced the targeted subsidy on electricity; diesel is the latest fuel that the government has removed from its blanket subsidy.
Despite the RM1.20 hike, Malaysia’s diesel pump price remains the second lowest in Asean, after Brunei, where diesel is sold at RM1.09 per litre (see chart). Across the northern border, the diesel pump price is at RM4.24 — a price difference of 89 sen per litre.
Speaking at a press conference, Amir Hamzah said the government is expected to save RM4 billion a year as a result of the targeted diesel subsidy.
“Diesel price will be announced on a weekly basis, according to the ministry’s current financial practice. However, the government will continue to monitor the situation to avoid price instability,” he said.
According to him, 30,000 private diesel vehicle owners whose household incomes are at RM100,000 a year or below, will receive RM200 under the Budi Madani programme on Monday.
The targeted diesel subsidy will be concurrently implemented with the targeted assistance for the logistics sector (SKDS 2.0) disbursement of the Budi Madani cash assistance.
Individuals eligible for Budi Individu and Budi Agri-Komoditi, who have not yet registered, can still receive their monthly cash assistance for June 2024 if they apply before the end of June, according to the Ministry of Finance (MOF).
MOF’s statistics show that diesel subsidies ballooned 10 times in a short span of five years, from RM1.4 billion in 2019 to RM14.3 billion in 2023. The big jump in diesel subsidy bill was not only because of the higher international price, but also bigger consumption volume.
The amount of diesel consumed increased to 10.8 billion litre in 2023, from 6.1 billion litres in 2019. The quantum leap in consumption, MOF pointed out, could be due to the cross-border smuggling activities.
In other words, the blanket diesel subsidies have benefitted the illicit diesel smuggling activities, while stretching the government’s fiscal positions.
“Malaysia can ill afford to continue losing billions of ringgit to smuggling, which could otherwise be better spent to benefit Malaysians and developing our nation,” Amir Hamzah said.
The rationalisation of diesel subsidies is not expected to cause severe inflationary pressures, say economists, partly because the logistics and transportation sector continue to enjoy subsidised diesel.
CGS International economist Nazmi Idrus estimated that at most, this year’s fiscal deficit “could decrease from 4.3% of GDP (gross domestic product) to 3.8% of GDP, assuming RM10 billion in savings from diesel fleet card deployment and the floating of diesel prices”.
Read also:
Subsidised Diesel Regulation System: Firms yet to receive fleet cards told to keep receipts for cash refund
Anwar: Targeted subsidies to start with diesel and involve only consumers in Peninsular Malaysia
Diesel subsidy pilot programme still ongoing, open to registration, says Armizan
Approved logistics players to get diesel fleet cards amid subsidy rationalisation
Govt approves over 30,000 Budi Madani cash aid applications, RM200 to be credited on June 10
Why PMX’s fuel subsidy rationalisation announcement, sans timeline, still matters
RM4b estimated savings from targeted diesel subsidy to give govt larger fiscal space, says Amir Hamzah
Govt to intensify efforts to enhance public understanding of diesel subsidy rationalisation, says Amir Hamzah
Budi Madani cash assistance sufficient for most diesel users, says Amir Hamzah