KUALA LUMPUR (March 27): Malaysia’s latest move to cap the monthly subsidised RON95 fuel quota from 300 litres to 200 litres per individual may generate a “modest fiscal saving” of about RM5 billion annually, according to TA Securities. 

With only about 10% of users exceeding the quota, the 33% reduction is expected to lower subsidised fuel consumption by roughly 3.3%, implying that some 2.7 billion litres will shift to market pricing at a subsidy differential of around RM1.88 per litre, the research house calculation showed. 

“However, the realised savings are likely to be lower, as behavioural adjustments — such as households limiting travel, optimising fuel usage, or adopting flexible work arrangements as encouraged by the government — would reduce excess consumption and, in turn, the volume subject to market pricing,” it said in a note on Friday.

The revision, effective April 1, applies to Malaysia’s Budi95 programme — a targeted subsidy mechanism that allows eligible individuals to purchase RON95 petrol at a subsidised price, currently set at RM1.99 per litre, up to a monthly quota. Consumption beyond the now 200-litre cap is priced at a floating market rate.

The policy adjustment comes amid mounting fiscal pressure, with Malaysia’s fuel subsidy bill estimated at around RM4 billion per month. The government has framed the move as part of broader subsidy rationalisation efforts aimed at improving efficiency, reducing leakages, and better aligning subsidies with actual consumption patterns.

As for now, the quota revision impact on the country’s overall growth is expected to be limited, according to TA Securities, maintaining its 2026 gross domestic product (GDP) forecast at 4.3% to 4.7%, pending further guidance from Bank Negara Malaysia, which is scheduled to release updated projections on March 31.

While higher fuel prices could exert some pressure on household spending and transportation costs, the government’s broader subsidy framework is expected to cushion the impact on overall consumption, the research house noted.

That said, the policy may still modestly compress disposable incomes, particularly among middle- to higher-income households and urban commuters who are more likely to exceed the revised quota.

“The additional fuel cost borne by consumers is estimated to range between RM5 billion and RM8 billion annually, after adjusting for the share of total fuel consumption affected and partial pass-through to businesses,” TA Securities added. 

As such, market players in the downstream oil and gas sector like PETRONAS Dagangan Bhd (KL:PETDAG) are viewed as unlikely to see a major material impact on earnings after the government’s latest policy revision, given the relatively inelastic nature of petrol demand, according to MBSB Research.

“The reduction in quota is unlikely to significantly alter aggregate demand dynamics,” MBSB said in a separate note on Friday.

Meanwhile, inflationary pressures are also still expected to remain contained as the effective increase in fuel prices would be partially diluted, resulting in only a modest impact on the consumer price index (CPI).

Still, TA Securities flagged that the recent CPI readings have yet to fully reflect the sharp rise in global oil prices, suggesting that underlying inflationary pressures may be understated and could become more evident in the coming months.

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