Diesel subsidies cost govt RM1bil a month, says minister

PETALING JAYA: Diesel subsidies cost the government’s coffers RM1bil a month while leakages cost the nation RM4.5mil a day, says Finance Minister II Datuk Seri Amir Hamzah Azizan.

“The disparity from market price has incentivised years of smuggling into neighbouring countries and allowed large segments of the commercial sector to increase profits on the back of cheap diesel, which they are not eligible for in the first place,” he said.

Amir Hamzah added in a LinkedIn post on Thursday (May 23) that the implementation of targeted subsidies for diesel are among the the key reform measures under the Ekonomi Madani framework.

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He said that these reforms are aimed at ensuring sustainable fiscal management and addressing the issue of serious leakages from the system without compromising the rakyat's welfare.

“We should be reminded that blanket subsidies are unsustainable over the long run, and need to be used as a tool to assist the most vulnerable groups in society,” he added.

Amir Hamzah said the Finance Ministry is working closely with the relevant ministries on fine tuning the mechanism to ensure that those who deserve will receive subsidies.

In announcing the fuel subsidy rationalisation in a national address on Tuesday (May 21), Prime Minister Datuk Seri Anwar Ibrahim said subsidies for diesel will be withdrawn for the rich and foreigners.

The diesel subsidy will first be rationalised in the peninsula. The implementation in Sabah and Sarawak will happen later, he said.

However, he did not indicate the implementation date for the subsidy rationalisation.

To prevent any drastic increase in the cost of goods and services in the peninsula, Anwar said subsidies would be continued for traders using diesel-powered commercial vehicles and for public transportation.

Ten types of public transportation vehicles, including buses and taxis, as well as 23 goods transport vehicles will come under the Subsidised Diesel Control System (SKDS).

Diesel subsidies will also continue for certain categories of fishermen.

The Prime Minister said cash aid would also be given for eligible individuals who own private diesel-powered vehicles such as small traders and farmers, among others.

He added that lower-and middle-income groups who use diesel for their businesses will not be affected by the rationalisation.