Stay the course with subsidy rationalisation

Photo: AZHAR MAHFOF/The Star

There must be no U-turns on implementing the fuel subsidy rationalisation policy because of pressure from vested interests and political groups.

Government leaders must bite the bullet when implementing policies perceived to be unpopular but which, in the long-term, will make our economy more resilient for the benefit of the people and the nation.

Beginning with targeted subsidies for diesel fuel is the right move. Subsidies must be only for those in need and not for everyone regardless of their economic status. By implementing this rationalisation policy the government will have at its disposal RM4bil – one well-known economist estimates RM8bil – for economic development and social welfare. The recipients of subsidies must be empowered so that, after a period, they can stand on their own feet and not be dependent on handouts.

The implementation of the policy must be closely monitored to ensure that there are no leakages and abuses. The subsidies must go to the targeted individuals, groups, and businesses and not be hijacked by corrupt elements. Any weaknesses in the implementation must be attended to immediately and corrected.

There must be a dedicated desk in the relevant ministries to monitor the implementation and to deal with problems and complaints from affected parties.

The Domestic Trade and Consumer Affairs Ministry must monitor the prices of goods and services sold to the public to prevent profiteering by unscrupulous traders taking advantage of the removal of diesel fuel subsidies. According to economic experts, the rationalisation will have only a minimal effect on the cost of doing business. Therefore, there is no justification for hiking up prices. Firm action must be taken against the profiteers, including prosecuting them and cancelling their licenses.

Based on the experience gained from implementing the removal of diesel fuel subsidies, the next move should be the rationalisation of RON 95 petrol subsidies which will produce even larger savings for the government.

Fuel subsidies, including for diesel, amount to a whopping RM60bil annually, which is 1.5 times the amount allocated for healthcare (around RM40bil) in the 2024 budget. A modern 1,000-bed hospital costs between RM1.3bil and RM1.4bil. Just imagine what we could do with the savings from removing subsidies – better equipped hospitals and vastly improved healthcare is just the beginning.

The price of Malaysia’s subsidised petrol (specifically, RON 95) makes it the cheapest among nine of the Asean member countries. The petrol price in Malaysia is 47.44% less than the cost in Indonesia (RM3.90) and 54.24% less than in Vietnam (RM4.48).

Blanket subsidies are not sustainable as they stress the country’s coffers. In 2020, the government spent RM4.66bil on total subsidies; in 2021, RM13.13bil; and in 2022, close to RM80bil, which was described as the “highest in history”.

With the savings on fuel subsidies, the government should improve public transportation, which is generally lacking in the country, ensuring frequent service as well as an efficient feeder bus system for greater convenience for commuters. This will reduce the number of private cars on the roads leading to energy saving and less environmental pollution.

MOHIDEEN ABDUL KADER

President

Consumers Association of Penang (CAP)