Second finance minister Amir Hamzah Azizan announced that diesel subsidies for certain groups in Peninsular Malaysia would be discontinued, setting the price of diesel at RM3.35 per litre, up from the current price of about RM2.15 per litre. The finance ministry will begin adjusting diesel fuel prices to align with market prices, following the prime minister’s recent announcement on the rationalisation of diesel subsidies. The Borneo states of Sabah and Sarawak will be exempt from these reforms due to the widespread use of diesel vehicles.
In his address, the prime minister emphasized that any targeted subsidy should not burden the majority of the people. The government will provide diesel subsidies to businesses using select commercial diesel vehicles and eligible individual owners of diesel vehicles will receive cash handouts. To mitigate the impact of the reforms, the government introduced the Budi Madani cash aid programme, providing RM200 to around 30,000 eligible recipients.
Malaysia has some of the cheapest petrol and diesel prices globally. The rationalisation of fuel subsidies has been a topic of discussion for nearly two decades, with no government taking action until now. These reforms mark the third government initiative to restructure the country’s subsidy distribution system, following rationalisation of electricity tariffs and chicken sales last year. These reforms are estimated to save RM4.5 billion and RM1.2 billion a year respectively, as part of a larger shift away from costly blanket subsidies.
According to the prime minister, blanket subsidies primarily benefit the ultra-rich and 3.5 million foreigners, as they consume or spend more on goods and services. The focus on targeted subsidies aims to make the system more equitable and efficient. These reforms to diesel subsidies are part of a broader effort to move away from blanket subsidies and towards more targeted and efficient subsidy distribution. The government’s commitment to implementing these reforms signals a significant shift in policy and an effort to address long-standing issues in the country’s subsidy system.
