Diesel is pricier now but govt still spending about RM7 billion in subsidies

Despite the price of diesel increasing by RM1.20 at the pumps, there’s still plenty subsidisation ongoing as Prime Minister Datuk Seri Anwar Ibrahim disclosed that the government retains approximately RM7 billion in diesel subsidies for Peninsular Malaysia.

As reported by Bernama, the PM clarified that while subsidies have not been abolished, efforts to rationalise diesel subsidies aim to improve their efficiency, preventing misuse and ensuring they benefit the intended recipients.

"The main goal of the diesel subsidy rationalisation policy is to ensure that subsidy wastage no longer continues while ensuring that the savings are returned to the wider population," he said in a statement.

Eligible recipients (vehicle owners/operators) can receive a monthly rebate of RM200 via the Budi Madani program, while commercial fleet operators can still accessed diesel at the previous retail price of RM2.15/litre via use of an issued fleet card.

Additionally, fuel for public transport vehicles including school buses, express buses, ambulances, and fire department vehicles will still be capped at RM1.88/litre under SKDS, for example. Fisherman also continue enjoy subsidised fuel at an even lower rate of RM1.65/litre.

Anwar also highlighted that savings from targeted subsidy measures will be reinvested in critical sectors such as education, healthcare, public transportation, and others that significantly impact the public, also taking the opportunity to affirm the MADANI Government's commitment to curbing diesel smuggling (into Thailand, for example) while balancing supply concerns and the cost of living of Malaysians.

Operations initiated by the Ministry of Domestic Trade and Consumer Affairs (KPDN) to combat improper use of subsidised diesel have been fruitful in the past. By December 31, 2023, authorities had seized 6.44 million litres of diesel, valued at approximately RM14.12 million, from falling into the wrong hands. The success of these operations has led to the launch of Ops Tiris 3.0, expanding its scope to include other regulated goods.

Anwar noted that despite the fluctuations in price of global crude palm oil, his administration has maintained stable prices for packaged pure palm cooking oil, citing several examples where maintaining these prices mitigated potential increases due to rising costs.

Back to the topic of diesel fuel, Finance Minister II Datuk Seri Amir Hamzah Azizan emphasised that the move to price diesel at RM3.35/litre, coupled with targeted subsidy implementation, could potentially save RM4 billion annually while reinforcing the country's fiscal resilience.

We suspect it won’t be long after the successful normalisation of a target subsidy for diesel that the government will proceed to their rollout plan for the removal of the blanket subsidy for RON95 petrol, which will impact the average Malaysian driver much more directly.