Better support: A receipt showing the RON95 price drop from RM2.05 to RM1.99 per litre. The government expects Budi95 to generate savings for strengthening targeted aid to vulnerable groups.
THE diesel subsidy rationalisation programme implemented in 2024, along with the more recent RON95 initiative, marks a bold step in Malaysia’s journey toward more responsible fiscal management.
“By transitioning from a universal subsidy to a targeted framework, the government has addressed long-standing economic distortions while safeguarding the welfare of the rakyat through initiatives such as Budi Madani (streamlined assistance for targeted diesel users) and Budi95 (for RON95),” the government said on balancing fiscal reform and social protection, published in its Fiscal Outlook 2026 report.
Explaining the rationale for fuel subsidy reform, it noted that Malaysia’s subsidised pump prices, among the lowest regionally, had created a price disparity.
This price gap led to widespread misuse, with subsidised diesel diverted to unauthorised commercial activities and smuggling across borders, causing significant economic distortions and fiscal costs.
“Between 2019 and 2023, diesel car registrations grew modestly by 15%, yet subsidised diesel consumption ballooned by 73%, leading to a nearly tenfold increase in the government’s subsidy bill.
“Since the introduction of rationalisation measures, positive outcomes have been observed.
“Diesel smuggling activities have significantly declined from 992 cases in 2023 to 655 cases in 2024, and further decreased to 261 cases as of July 2025.”
The Budi Madani programme is multi-pronged , encompassing three categories of recipients.
For individuals, it provides a direct monthly cash transfer of RM200 to eligible individual diesel vehicle owners.
The second category targets small-scale farmers, livestock breeders, aquaculture operators and commodity smallholders.
Recipients get a monthly cash transfer of RM200, recognising the sector’s challenges and supporting continuity of agricultural production.
The third category is allocated quotas of subsidised diesel through fleet cards for selected land transport operators and logistic companies.
The transition to a targeted subsidy programme has delivered substantial fiscal gains.
Although initial projections estimated RM4bil in annual savings from the diesel subsidy reform, actual savings since its implementation in June 2024 have exceeded RM7bil, easing fiscal pressure and enabling greater investment in priority development areas, the report said.
Meanwhile, under a targeted subsidy scheme for RON95, which commenced on Sept 27, 2025, Malaysians with a valid driving licence are entitled to purchase RON95 at a subsidised price of RM1.99 per litre, while non-citizens will pay an unsubsidised price.
Each citizen receives a monthly quota of 300 litres, with exemptions for e-hailing drivers who may apply for additional quotas to safeguard their livelihoods.
The subsidy mechanism seamlessly integrates with MyKad verification at fuel stations, complemented by digital support via e-wallets and mobile applications.
To ensure smooth implementation, the rollout was conducted in phases, starting with early access provided to 300,000 armed forces and police personnel on Sept 27, followed by STR (Sumbangan Tunai Rahmah) recipients from the bottom 40% income group on Sept 28.
The programme was extended nationwide to 16 million eligible Malaysians on Sept 30.
The government expects Budi95 to generate savings that would be redirected to strengthen targeted aid programmes like STR and Sara (Sumbangan Asas Rahmah), ensuring better support for vulnerable groups.
