KUALA LUMPUR – The sale of diesel, especially near Peninsular Malaysia’s borders, dropped in the week after June 10, when targeted subsidies for the fuel were implemented and the retail price was raised to RM3.35 per litre.
Data from the Finance Ministry showed a comparison of diesel sales in border areas, retail and commercial segments before the rationalised subsidy, from June 1 to 8, and after, from June 10 to 17.
Diesel sales in border areas dropped from 167 kilolitres per day during the June 1 to 8 period, to 100 kilolitres per day for the June 10 to 17 period.
This was a 40% drop of diesel sales in border areas and is reflective of reduced diesel smuggling activities, the ministry said in a slide deck on diesel subsidy data.
It has been reported that traders and diesel smugglers in neighbouring countries, especially in southern Thailand, have been affected by the rationalisation and find it no longer worthwhile to smuggle Malaysia’s diesel, which was previously priced at RM2.15 per litre.
For retail sales of diesel, the 28.7 million litres per day sold in the week before June 10 dropped to 20.9 million litres per day within a week after implementing the targeted subsidy.
The reduction of 7.8 million litres per day is a 27% drop in retail sales, and is an indicator of the amount of leakage previously.
Meanwhile, in the commercial segment, the sale of diesel increased 4 million litres per day for June 10 to 17 after the subsidy rationalisation.
This 44% increase in commercial diesel sales is a reflection of the previous subsidy’s abuse by industry, the ministry’s slides said.
Likewise, the commercial segment had abused some 80% of subsidised diesel when the retail price was RM2.15 per litre, when they should have been buying the fuel at unsubsidised prices.
The percentage abused was derived from the drop in commercial diesel sales of more than two billion litres each year from 2019 to 2023.
Before the targeted diesel subsidies, Malaysia’s diesel was almost the cheapest in the world after Brunei, which sells it at the equivalent of RM1.09 per litre, according to data as of June 9.
Thailand and Indonesia, destinations for diesel smuggled from Malaysia, sell it at the equivalent of RM4.24 per litre and RM4.44 per litre, respectively.
Singapore sells diesel at an equivalent price in its currency at RM8.66 per litre.
The sale of subsidised fuel to foreign-registered vehicles is prohibited but petrol station operators have said it is difficult for them to confront vehicle owners and halt their purchase.
While foreign drivers get away, fuel stations bear the brunt of the law if caught selling subsidised fuel to foreign registered vehicles.
The higher price of diesel does not apply to Sabah and Sarawak. Subsidised diesel at different rates is also still available for vehicles in the public land transport and logistics sectors through a fleet card system, as well as for fishermen, while a cash aid is given to individual diesel vehicle owners and small agri-commodity operators.
Yesterday, Finance Minister II Datuk Seri Amir Hamzah Azizan said the government will still have to spend RM10 billion on diesel subsidies despite estimated savings of RM4 billion a year from retargeting subsidies for the fuel. – June 25, 2024