PETALING JAYA: The government should consider introducing a tiered pricing mechanism for fuel subsidies to reduce the burden on the nation’s coffers, says an economist.
Geoffrey Williams suggested a model where motorists receive a full subsidy for minimal usage, with the subsidy gradually decreasing once a certain threshold is crossed.
Citing an example, he said the government could provide subsidised RON95 petrol for the first 100 litres, with the subsidy halved for the next 50 litres, and further halved for the subsequent 50 litres, before being totally withdrawn for anything above 200 litres.
“This is just an example, but it would save subsidy costs, stop hoarding, as well as cut subsidy abuse and cross-border resale. It would also encourage people to be more fuel-efficient,” he said.
He said a simpler option would be to reduce the current monthly quota to 100 litres instead of the proposed 200 litres.
“The Finance Ministry reported that 95% of motorists use less than 180 litres per month. So, while a 200-litre limit would cut theft and hoarding, it will not encourage people to economise,” he added.
On managing the government’s financial burden, Williams warned against relying on austerity measures to foot the multi-billion-ringgit fuel subsidies.
Instead, he said the current challenges should be used as a catalyst to drive behavioural change.
“It is better to encourage behavioural change by cutting petrol use through public transport, carpooling and work-from-home arrangements,” he said.
Economist professor emeritus Dr Barjoyai Bardai said the fuel subsidy quota should reflect realistic consumption patterns.
A higher quota for fuel subsidies, he said, would mean higher fiscal leakages.
“A 300-litre ceiling enables higher-income drivers with larger vehicles to consume more subsidised fuel, distorts consumption behaviours, and allows potential reselling and cross-border leakages,” he added.
He also said the tiered model for fuel subsidies is more efficient and fairer to Malaysians.
“While short-term subsidies protect the rakyat, data suggests Malaysia may have to rationalise fuel subsidies if global conditions remain unchanged,” Prof Barjoyai said, adding that any new model should be supported by better public transport, EV adoption and flexible remote work options.
