RON 95 Fuel Subsidy Mechanism Still In Works, Luxury Cars Won't Qualify

One of the most hotly debated announcements during the government's budget announcement was the introduction of a fuel subsidy system for vehicles with engines of 1,500 cc or less in displacement. Unfortunately, as many have pointed out, there are giant holes in the system if it were to be based on displacement.

To clarify, Lim Guan Eng explained his points a little further. "Actually, we are still discussing the benefits (of the subsidy) so that it can be expanded to include the middle class and not just the low-income earners (B40). But I would like to stress here that luxury cars owners should not expect (to benefit)," he said during a press conference following the budget announcement.

The fuel subsidy as it was first announced would be a 30 cent subsidy on RON 95, with a cap at 100 litres of fuel per month for cars and 40 litres of fuel a month for motorbikes - which works out to RM 30 and RM 12 respectively. It's not a particularly huge subsidy, but it's a subsidy nonetheless, and people have been upset that more expensive cars with downsized turbocharged engines would benefit.

For example, a Honda Civic 1.5T would qualify, while a Honda Civic 1.8 would not. A Volkswagen Polo 1.2 TSI would benefit while the Volkswagen Polo 1.6 wouldn't. The newly launched Mercedes-Benz C200 would get the subsidy, while a Proton Iriz 1.6 would not. Even so, the counter argument is that if you can afford a luxury vehicle, the subsidy is going to be more like a drop in an ocean of expenses.

With the mechanism still up in the air, the second half of the problem still needs to be answered. Implementing this subsidy would require the government to work with multiple vendors and provide a way for the consumer to either claim back their money, or to receive the subsidy on the spot. In either case, it's a lot of messy paperwork and bureaucracy that can make a simple subsidy needlessly complicated.

The government has gotten the ball rolling with stakeholders, meeting fuel companies and dealers to discuss how best to implement the subsidy. The mechanism itself is expected to be implemented around April 1st 2019, or before the end of the second quarter. There's also talk that the subsidy system can be expanded to beyond fuel alone, which is a great thing for the B40 income group.