KUALA LUMPUR – Early signs indicate that the recent diesel subsidy rationalisation programme is effectively reducing leakages, according to Finance Minister II, Datuk Seri Amir Hamzah Azizan.
The minister reported a significant decrease in diesel retail sales since the retargeting began.
He noted that, when comparing sales before and after the subsidy retargeting, average daily sales at petrol stations in Peninsular Malaysia have fallen by more than 30%, with stations in border areas experiencing reductions of 40-50%.
“This is a clear indicator of reduced smuggling. By fixing the retail price to the market level without subsidies, we reduce the incentive to smuggle.
“This cannot be achieved if the government implements retail price increases in small instalments, as it will not address the price gap,” he said during a question-and-answer session in the Dewan Rakyat today.
Amir Hamzah was responding to Datuk Abdul Khalib Abdullah (Rompin-PN) regarding the diesel subsidy coordination and the effectiveness of Budi Madani assistance for owners of M40 and B40 diesel vehicles in combating smuggling.
He said the targeted assistance is provided to B40 and M40 individuals who own diesel vehicles to mitigate the impact of higher retail prices.
“Cash assistance of RM200 per month or RM2,400 per year is based on usage data. The RM200 assistance is estimated to cover the additional cost of travelling 75 km daily for typical diesel vehicles like pickup trucks.
“This usage level is sufficient for over 80% of private diesel vehicle users, according to the Household Income and Expenditure Survey by the Department of Statistics Malaysia,” he said.
Amir Hamzah asserted that the subsidy targeting approach, combined with setting market prices and providing targeted assistance, effectively combats leakages while protecting the public from rising costs.
“Various enforcement operations will be intensified, including Ops Kesan, Ops Catut, Ops Terjah, Ops Tiris, Ops Menu, Ops Pasar and Ops Samar, all led by the Ministry of Domestic Trade and Cost of Living.
“These operations aim to stabilise the supply of goods and services and curb price profiteering,” he said.
He said the country’s diesel smuggling activity has been evident, with subsidised diesel usage increasing by over 80%, from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite no significant rise in diesel vehicles.
In response, the government has retargeted the subsidy by setting the retail price of diesel at the unsubsidised price of RM3.35 per litre, while providing special assistance for targeted groups, including Budi Madani assistance for B40 and M40 diesel vehicle owners. – July 2, 2024