KUALA LUMPUR – The year 2025 is poised to be another challenging period for Prime Minister Datuk Seri Anwar Ibrahim’s unity government, as it undertakes significant fiscal reforms with the introduction of a targeted subsidy mechanism for RON95 petrol mid-year.
This initiative follows Putrajaya’s targeted subsidy for diesel, which came into effect on June 10 this year.
Under the diesel subsidy scheme, the retail price of diesel is set at RM3.35 per litre in Peninsular Malaysia, while prices remain at RM2.15 per litre in Sabah, Sarawak, and Labuan.
The system, supported by the Subsidised Diesel Control System (SKDS) 2.0, issues fleet cards to eligible logistics vehicles to ease the financial burden on goods transportation.
Public transport vehicles, including school buses, express buses, ambulances, and fire engines, benefit from SKDS 1.0, which maintains diesel prices at RM1.88 per litre.
Meanwhile, subsidised diesel for fishermen remains at RM1.65 per litre.
To further cushion the impact, the government introduced cash aid initiatives. These include the BUDI Individu scheme, which provides RM200 monthly to Malaysians owning diesel vehicles, and the BUDI Agri-Komoditi scheme, offering similar support to small-scale farmers and commodity smallholders.
Transport Minister Anthony Loke recently announced that ferry operators serving major islands, including Langkawi, will also benefit from the diesel subsidy from January 1, following in-principle approval by the Finance Ministry.
Despite criticism of the diesel subsidy reform, Anwar defended the policy, emphasising that fuel subsidies have disproportionately benefited the wealthy and foreign nationals.
He argued that redirecting these savings—estimated at RM8 billion annually—would allow for greater investment in cash assistance programmes and help curb cross-border smuggling, particularly into Thailand.
How will the RON95 subsidy work?
Economy Minister Rafizi Ramli revealed that the targeted RON95 subsidy will be determined by net disposable income, with 85% of Malaysians expected to qualify.
The remaining 15%, categorised as the T15 high-income group, will not be eligible.
Rafizi said that detailed classifications for the subsidy rationalisation plan will be announced by mid-2025.
Anwar previously highlighted that wealthy individuals, foreign nationals, and businesses—constituting 15% of consumers—currently enjoy 40% of the RON95 subsidy, underscoring the need for reform.
While public reaction to the new policy remains uncertain, the subsidy reform will likely keep the Economy Ministry and the Domestic Trade and Costs of Living Ministry busy in 2025.
These ministries will be tasked with preventing businesses from exploiting the policy shift to raise prices unfairly.
Malaysians can also expect increased enforcement of the Price Control and Anti-Profiteering Act 2011, as the government cracks down on unscrupulous traders seeking to profit from the changes. – December 31, 2024