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Friday April 25, 2008

Subsidy on diesel to go first, says Shahrir

KUALA LUMPUR: The restructured fuel subsidy scheme will see the removal of subsidy on diesel first.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said diesel would soon be sold at the market rate at the pumps when a mechanism to deliver subsidies directly to those entitled has been decided upon.

“We are looking at diesel first, and how to ensure that subsidised diesel gets to the right groups, especially to the transport sector and (those involved in) certain economic activities which require diesel subsidy so that we can cut out leakages.

“Schoolbuses for example. We have to have a mechanism on how to deliver the diesel (subsidy) to the schoolbus drivers so that the cost of transport will not go up,” he said.

Without the subsidy, diesel will cost more than RM2 a litre. The price of diesel at the pump now is RM1.581 a litre.

Shahrir said the move to restructure the fuel subsidy was necessary to ensure the money was not wasted through various ways such as diesel smuggling.

“We want to look at diesel first, then obviously we will have to look at petrol subsidies,” he said.

Shahrir said crude oil prices were at US$117 (RM372) per barrel, and the Government spent RM33bil on fuel subsidies last year.

He said another RM20bil of subsidy was spent on natural gas to subsidise Tenaga Nasional Berhad’s power generation.

“You are talking about RM53bil. And that does not include the subsidised amount that people pay. Our oil export in 2007 was RM77bil.

“So it is almost one-to-one what we consume and what we export,” he said.

On the Food Security Policy, Shahrir said it had been discussed in Cabinet and the Agriculture Ministry would look into increasing production to counter inflation.

“What we have not resolved is the delivery and distribution to consumers. We need to take into account some things. For instance, I want uniform pricing for foodstuff in Sabah and Sarawak and the Peninsula.”

He added that the inflation of food prices was higher than the Consumer Price Index (CPI), which recorded 2.8% in March.

“We cannot use the CPI as an indication of inflation as it does not reflect the price rise in food. The CPI is a theoretical basket of goods based on the consumption of a theoretical average family.

“In the basket, there’s the food component, transport, clothing and so on. If you take out other components and only focus on the food component, then you will see that the (inflation) rate is higher than the CPI,” he said.

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