THE government is set to introduce targeted diesel subsidies as part of the Ekonomi Madani framework, aiming to ensure sustainable fiscal management and tackle significant subsidy leakages, according to Finance Minister II Datuk Seri Amir Hamzah Azizan.

In a recent LinkedIn post, Amir pointed out that the current diesel subsidy costs the government RM1 bil per month.

The large discrepancy between subsidised and market prices has long encouraged smuggling into neighbouring countries and allowed ineligible commercial sectors to unfairly profit from cheap diesel.

“Losses due to these leakages amount to approximately RM4.5 mil per day,” noted Amir, emphasising the unsustainable nature of blanket subsidies.

He also confirmed that the Finance Ministry (MOF) is collaborating with other relevant ministries to refine the subsidy mechanism to ensure that only deserving recipients benefit.

In a video shared at the EY C-Suite Forum on May 14, Amir discussed the necessity of subsidy rationalisation due to the excessive incentives and leakages. He assured that the government is meticulously fine-tuning the mechanism to avoid errors when it is implemented.

“Subsidy rationalisation will come, but we will not press the button if we have not got this thing sorted out well.

“What the government is doing now is fine-tuning it to make sure that when it presses the button, it gets it right and it actually looks after the right groups and actually gets enough savings from the system as it stops.”

Moreover, Prime Minister Datuk Seri Anwar Ibrahim announced that diesel subsidies would be withdrawn for “the rich and foreigners,” with initial rationalisation efforts focusing on the peninsula before extending to Sabah and Sarawak.

However, a specific timeline for implementation was not provided.

To mitigate potential cost increases in goods and services, Anwar specified that subsidies would remain for traders using diesel-powered commercial vehicles and public transportation.

The Subsidised Diesel Control System (SKDS) will cover ten types of public transportation vehicles, including buses and taxis, as well as 23 categories of goods transport vehicles. Subsidies will also continue for certain groups of fishermen.

Furthermore, Anwar added that cash aid would be provided to eligible individuals owning private diesel-powered vehicles, such as small traders and farmers.

“Lower and middle-income groups that use diesel for their businesses will not be affected by the rationalisation.” - May 24, 2024

https://focusmalaysia.my/govt-to-implement-targeted-diesel-subsidies-rm1b-monthly-cost/