Putrajaya defends the need to do away with fuel subsidies after PKR MP calls for government to re-consider introducing fuel subsidies.
PETALING JAYA: The finance ministry today defended the removal of fuel subsidies and implementing a managed float system, arguing that subsidies had in the past failed to reach their intended target — the poor.
The ministry’s communication director, Lokman Noor Adam, in a statement, said many still “could not accept the fact” that Putrajaya needed to reduce bulk subsidy to targeted subsidy.
He cited the fact that in 2014, both the rich and poor benefited when RON95 was subsidised at RM0.6843 per litre.
Unfortunately, he noted, those who drove bigger cars used more petrol than those who owned smaller vehicles like the Perodua Kancil or a motorcycle.
This also meant the government was forced to pay thrice the amount in order to subsidise petrol for the middle or upper class.
“Is this fair?”
Lokman’s comments come in the wake of the call by PKR vice-president Rafizi Ramli for Putrajaya to consider re-introducing petrol subsidies as RON95 prices were expected to increase in 2017.
The Pandan lawmaker said based on the formula the government adopts to set petrol prices, RON95 will increase to RM2.20 per litre (from RM1.90 now) as crude oil prices have gone up by 18%.
The government had in 2014 removed fuel subsidies to bolster the national economy. The move, according to reports then, was expected to save the government up to US$6 billion annually.
Lokman also revealed that based on the ministry’s research, the government had spent 70% of the subsidy to help the well to do, while the 30% subsidy for RON95 and diesel were enjoyed by the rest.
This, he added, was the reason the government wanted to rationalise subsidies.
Lokman said the bulk subsidy also meant that foreigners in Malaysia could also enjoy the benefits from tax-paying Malaysians.
“Every day, subsidies meant for Malaysians would find their way into Singaporean cars. Subsidised petrol would be smuggled into Thailand and the Philippines as well as international waters.”
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