Fuel Subsidies! Coming to an e-Wallet Near You

The Malaysian government has been feverishly trying to restructure its fuel subsidies to address the huge dent it causes the national coffers. After many proposed ideas, perhaps they’ve finally made a decision.

Mind you, the decision surrounds the delivery mechanism of fuel subsidies and is not so much about the subsidies themselves. Essentially, they want a more targeted system that would accurately reduce the occurrence or likelihood that they can be enjoyed by their intended demographic, not the other way around.

Choose Your E-Wallet, Get The Rebates

This is opposed to how things work now where there’s a blanket subsidy, such as the one applied to RON95 petrol wherein the pump prices are capped at RM2.05. As you might imagine, finding a way to transfer the subsidies to deserving citizens is a tough task, and holding up progress on this effort for several months.

However, this could change rather soon as Johan Mahmood Merican, Deputy Secretary General of Treasury for Policy at the Ministry of Finance sat down for a morning interview with radio station BFM. While discussing this very matter, he revealed that the government is at least optimistic about e-wallets providing this ‘missing link’ solution.

Other Solutions To Targeted Distribution?

To this effect, they have already launched pilot testing programs using e-wallets to implement targeted subsidies but declined to reveal any more details such as which apps were likely to be supported.

Along a similar vein, earlier in March, the government had announced a list of e-wallet apps - BigPay, GrabPay, ShopeePay, and TNG eWallet - to be used to assist in disbursing the RM300 million to youths around Malaysia as part of the ePemula program. Prior to this there were the eBelia, ePenjana, and e-Tunai Rakyat programs that also used e-wallet deposits.

Johan estimated that another 3 to 6 months of testing would be required before it could be announced to the wider public, though the MoF is continuing to study other solutions. Another concern raised about the use of e-wallets is their lack of use by Malaysia’s more rural and elderly population.

There will likely not be a perfect remedy, but typically the one with the fewest compromises will win the day. If nothing else, it does also put a timeline as to how long our blanket subsidised RM2.05 RON95 could be available to us at petrol stations: perhaps not past end-2022.

So many more questions remain about the merits of e-wallets as a distribution method of fuel subsidies, but with the country's overall subsidies estimated to rise to nearly RM80 billion this year, they’ll need to take action pretty quickly.