KUALA LUMPUR: The government is likely to introduce a targeted fuel mechanism to cushion the impact of the rising crude oil prices, especially on the lower income group.
Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed said the government is still working on a suitable structure and expects it to be completed soon.
He also noted that the Finance Ministry is currently looking at whether the government is able to bear the subsidy and fuel prices for RON95 and diesel would remain for the time being.
"Those who can afford should pay more and the people who do not deserve (the subsidy) should not be given the subsidy at all. Subsidies are meant for the poor people, particularly the B40. The issue is timing when it is going to be implemented," he said during The Nation programme aired at Bernama TV today.
Mustapa said fuel subsidy has played an important role in moderating price increases in Malaysia, whereby the government has been able to maintain price increases between 2.0 per cent and 3.0 per cent for the last 10 to 20 years.
"However, it will be a big strain on the budget. When we outlined our budget last year, the estimate was about RM5 billion in subsidies, now the estimate is somewhere around RM30 billion, representing a six-fold increase in the amount of subsidies,” he added.
Mustapa said the oil subsidies involved four items namely RON95, diesel, liquefied natural gas and cooking oil.
He added that the rise in crude oil prices has affected the country’s inflation rate, where the Consumer Price Index (CPI) in March 2022 rose by 2.2 per cent to 125.6 against 122.9 in March 2021, surpassing the average inflation for the January 2011-March 2022 period which stood at 1.9 per cent.
"We believe this will be challenging for us moving forward. The impact is mainly on prices. We have not revised our growth projection and we are still sticking to Bank Negara Malaysia’s forecast of 5.3 per cent to 6.3 per cent growth this year.
"We have to be realistic as this is a very challenging period and there is a need to revise our growth forecast. The government will do the necessary,” he added. - Bernama