Lower car taxes to balance high fuel costs


Another petrol price hike unlikely for time being

PETALING JAYA: Although crude oil prices continued to climb after petrol prices were raised early last month, petrol prices are unlikely to be increased again due to the unpopularity of such a move.

The petrol price was increased on June 5 by 78 sen to RM2.70 a litre, which is still a subsidised price.

It is believed that at the current oil price of about US$143 a barrel, pump prices would be over RM4 a litre, a very high price for petrol, if the subsidy were entirely withdrawn.

Following public protests and complaints, Prime Minister Datuk Seri Abdullah Ahmad Badawi said in mid-June he would not impose another increase this year.

As the oil price has risen further following the petrol price increase, there are concerns the petrol price could be raised again this year, or early next year.

CMS Trust Management Bhd chief investment officer Scott Lim said the Government might or might not increase the petrol price again but should it decide to adjust the price again, it should be a “balanced adjustment.”

“If petrol prices are increased, the high taxes on cars should be reduced – it should be balanced on the other side of the equation,” he added.

Lim believed the current oil price was “not sustainable” in view of an economic slowdown and the resultant reduction in petrol consumption in almost every country.

Kumpulan Sentiasa Cemerlang Sdn Bhd head of research and partner Choong Khuat Hock believed it was unlikely there would be another petrol price hike due to political factors.

He noted the savings that were budgeted from the June subsidy reduction had been erased by the further increase in crude oil prices.

“We’re back to square one. It means the Government’s budget deficit will be a lot higher than its target of 3%,” he added.

If a high subsidy were to remain, someone would have to pay for it. “There’s no free lunch,” he added.

As another example of that, he pointed to the Government’s introduction of a windfall tax on independent power producers that had caused infrastructure bond prices to fall sharply.

As the Government’s budget deficit widened, it would have to borrow more to cover that gap, which would be taken as debts of the current generation of Malaysians to be repaid by future generations, he added.

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