Fuel Subsidy Programme: Who Benefits?

The government announced a new targeted fuel subsidy programme (FSP) that is expected to begin in January 2020. The Government will allocate RM2.2 billion for the FSP benefiting 8 million motorists.

The new petrol subsidy mechanism outlined by the Domestic Trade and Consumer Affairs Ministry (KPDNHEP) will gradually float the price of RON95 petrol in Peninsular Malaysia.

This means that the retail price for RON95 will be set by the cabinet based on global market prices. The subsidy will kick in whenever RON95 market price is above RM2.08 per litre and no subsidy if the price falls below RM2.08 per litre. For those living in Borneo, the price of RON95 will still be capped at RM2.08 per litre.

So who exactly benefits?

Under the new petrol subsidy mechanism, ONLY vehicle owners on Bantuan Sara Hidup (BHS) will be able to access subsidised petrol. Recipient’s household income must not be more than RM4,000. Drivers and riders must own a private vehicle that is registered under their name and have a valid driving license to qualify. To receive the subsidy vehicle owners must comply with the following criteria:

So how will it work?

Those who qualify for the subsidy will be paid a fixed amount of money depending on the type and number of vehicles owned. Car owners will receive RM30 while motorcycle owners will receive RM12 monthly. Payments will be made every quarter (4 months) and be transferred directly to BSH account holders. If a qualified individual owns more than one vehicle, they would only receive RM30 per month.

According to the Government, the new program functions as an equitable redistribution of national subsidies based on a data-driven policy. The program is designed to target and benefit only the needy, underprivileged and the disabled (OKU). While the current fuel subsidy is open to all citizens, the new scheme is expected to only benefit some 8 million Malaysians.

Will it work?

The amount of targeted subsidy transferred to the B40 and M40 at RM30 per month might just be enough for them to cover the direct cost of rising fuel prices. However, the removal of the subsidy could have indirect consequences for the public. As fuel is a cost element for the transportation of goods, prices of goods could see a hike.

Another big question about the implementation of this measure is whether the government has a complete database of the B40 as well as the M40. Are there still some who are outside of the system who are not captured by the database, and who would be significantly affected by the rising fuel prices?

The money saved by the government could be used to improve the public transportation system.

 Average monthly expenditure by consumption group, 2014

A cost-effective solution is needed. More buses should be on the road rather than billions invested in systems that only benefit a few. And why not free buses? More buses on the road at higher frequencies, special bus lanes, and congestion charges for those who still prefer to drive. Then maybe, we could resolve the Klang Valley traffic jam issue.

References:

1. Government announces new subsidy; here’s how it works & who would benefit, The Rakyat Post, Akmal Hakim, October 8, 2019

2. A more progressive solution than fuel subsidy, Mohd Ariff Mohd Daud, October 14, 2019 (www.freemalaysiatoday.com)

3. Fuel subsidy programme to begin in January, The Star, October 12, 2019