KUALA LUMPUR – The 40% decrease in diesel sales at stations near border areas on the peninsula is proof that previously subsidised fuel was misused, according to Deputy Domestic Trade and Costs of Living Minister Fuziah Salleh.
“In addition, petrol stations near the borders have experienced a 40% drop in diesel sales, indicating that smuggling fuel into neighbouring countries is a major issue.
“Since the diesel subsidy rationalisation, there has been a major change in consumption patterns in Malaysia.
“Overall, diesel sales have decreased by 30%, which is equivalent to 8 million litres per day. Commercial purchases of diesel, sold at current retail prices, have increased by 4 million litres per day,” she said in a Facebook post today.
She also reiterated that the main reason for the subsidy rationalisation is to curb leakages and to ensure spending cuts are used to benefit Malaysians.
Recently, the Finance Ministry reported that 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.
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 in diesel sales 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 from 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.
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 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.
Finance Minister II Datuk Seri Amir Hamzah Azizan had said the government would continue to fork out RM10 billion on diesel subsidies despite estimated savings of RM4 billion a year from retargeting subsidies for the fuel. – June 27, 2024