PETALING JAYA: Putrajaya’s decision to restore the Budi Madani RON95 (Budi95) quota to 300 litres is expected to provide meaningful relief to a small group of high-usage consumers, particularly lower-income households, although the move could cost about RM5bil in forgone annual savings, says an economist.
Sunway University economics professor Dr Yeah Kim Leng said that while the impact would be minimal for the 90% of consumers who use less than 200 litres of RON95 a month, those consuming between 200 and 300 litres could save between RM120 and RM150 monthly.
He said the higher quota would provide greater relief, particularly for those engaged in farming and other commercial activities.
“Restoring the RON95 and diesel quotas will significantly add to the government’s subsidy bill, foregoing roughly RM5bil in annual savings from the earlier 200-litre cap and contributing to a projected RM40bil total subsidy outlay for 2026.
“It partially reverses recent rationalisation gains, but the negative impact is contained because the targeted Budi Madani framework remains intact and 90% of RON95 users consume under 200 litres, meaning the extra cost only applies to a small high-usage minority.
“It is a calculated trade-off. While it risks undermining some fiscal discipline, the adjustment is deemed necessary to ease genuine hardship for e-hailing drivers, delivery riders and rural communities, especially in Sarawak and Sabah, with the government offsetting the added expense through stronger revenue collection and spending reprioritisation to keep the deficit within a manageable range,” he said.
Dr Yeah said the move did not signal a fundamental shift away from targeted fuel subsidies, but represented a pragmatic recalibration in response to genuine hardship.
“To ensure the higher quotas benefit those who genuinely need assistance, the government must prioritise strengthening verification systems to prevent leakage and smuggling, and retaining the flexibility to adjust quotas based on evolving economic conditions, all while continuing long-term structural reforms to eventually transition away from blanket fossil fuel subsidies altogether,” he said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said a higher allocation for fuel subsidies would reduce the risk of rising inflation, particularly while crude oil prices remained elevated.
He said the higher diesel subsidy allocation could also ease pressure on businesses.
“Based on the Prime Minister’s statement, those measures will be funded from funds recovered from illegal proceeds through due legal process and court rulings, which could mean the impact on government finances could be minimised.
“What matters is the funding of such an expenditure given that it will have an immediate impact on the government’s fiscal position,” he said.
Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said the higher quota would provide immediate relief to households with higher fuel consumption, as a larger quantity could be purchased at the subsidised price.
“However, we should be careful about interpreting this as a genuine reduction in the economic cost of fuel.
“The subsidy does not make petrol cheaper to the economy as a whole. It simply means that consumers pay one part of the cost at the pump, while the government pays another part on their behalf,” he said.
He added that subsidies could create the illusion of cheaper fuel, with the cost eventually resurfacing elsewhere in the economy through inflation and higher prices.
