Diesel subsidy costs RM1bil a month, says Amir

PETALING JAYA: Diesel subsidies cost the government RM1bil a month, while losses from leakages amount to a whopping RM4.5mil a day, says Finance Minister II Datuk Seri Amir Hamzah Azizan.

He said the implementation of the targeted subsidy for diesel is among the key reform measures under the Ekonomi Madani framework to ensure sustainable fiscal management and to address the issue of serious leakages within the system, without compromising the rakyat’s welfare.

“The diesel subsidy in Malaysia rings up a bill of RM1bil every month for the government. The disparity with the 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 also said losses due to leakages amount to about RM4.5mil per day.

“We should be reminded that blanket subsidies are unsustainable over the long run,” he said in a LinkedIn post yesterday.

He said the Finance Ministry is working closely with other relevant ministries on fine-tuning the mechanism to ensure only the deserving will receive subsidies.

Amir had also attached a video of him addressing the matter at the @EY C-Suite Forum on May 14.

In the video, he said the subsidy rationalisation was required because there were leakages and the incentives given were too wide.

At the same time, tackling the problem is no walk in the park, as the government must get the mechanism for fuel subsidy rationalisation right.

“Subsidy rationalisation will come, but we will not press the button if we have not got this thing sorted out well.

“What the government is doing now is fine-tuning it to make sure that when it presses the button, it gets it right and it actually looks after the right groups and actually gets enough savings from the system as it stops,” he added.

In announcing the fuel subsidy rationalisation in a national address on Tuesday, Prime Minister Datuk Seri Anwar Ibrahim said subsidies for diesel would be withdrawn for “the rich and foreigners”.

The diesel subsidy will first be rationalised in the peninsula, while the implementation in Sabah and Sarawak will happen later, he said, without mentioning any timeline for implementation.

To prevent any drastic increase in the cost of goods and services, 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.

Anwar added that cash aid would also be given to eligible individuals who own private diesel-powered vehicles, such as small traders and farmers, among others.

“Lower and middle-income groups that use diesel for their businesses will not be affected by the rationalisation,” he said.

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