GEORGE TOWN, May 26 – The Penang Consumers Association (CAP) welcomes the government’s announcement of plans to implement targeted fuel subsidies for those in the Under 40 (B40) group. We urge the government to speed up its implementation because the war in Ukraine is unlikely to end soon and contrary to what some consumers may think, subsidies come from taxpayers. Therefore, it does not benefit Malaysia or the people.
In fact, the war in Ukraine is a reminder for Malaysia. It resulted in the Brent crude oil index exceeding USD130 a barrel in early March, the highest in 14 years. Until now the price is still over USD100 per barrel. Currently the government subsidizes RON 95 petrol, diesel, and liquefied petroleum gas (LPG) and Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz has estimated the subsidy alone will cost RM28 billion in 2022.
Malaysia’s subsidized petrol price (RON 95) makes it the most affordable among the nine member countries of the Association of Southeast Asian Nations (ASEAN) listed. Petrol prices in Malaysia are 42.77 per cent lower than Indonesia (RM4.77) and 34.34 per cent lower than Thailand (RM5.94).
In fact, the current subsidy system as a whole is flawed because it benefits the rich over the poor. The reason is that most cars, including many expensive cars, can also use RON95 and this means the petrol price subsidy will be distributed unevenly between various income groups with those with low income getting less benefit as they are more likely to own vehicles with low engine capacity .
In addition, subsidized petrol is also open to abuse such as diesel smuggling. The government should consider adopting an electronic subsidy card system to provide targeted subsidies to the B40 group for the purchase of RON 95, cooking gas (LPG), cooking oil and other price -controlled goods as determined by the government. The Lower Middle 40 (M40) group also needs to be given assistance.
The government can credit a fixed minimum monthly subsidy into a person’s electronic subsidy card that the person can use to buy gasoline, cooking oil, cooking gas, and whatever the government decides to subsidize. To make a purchase, the person only needs to show his or her identity card for verification purposes.
At RM28 billion, this subsidy is more than RM25 billion allocated in 2022 to the Malaysian Family Foundation which will be used to protect the welfare, education, and future of orphans or RM20 billion allocated for the implementation of the Malaysian Incentive Community Empowerment Initiative.
With subsidy savings, the government should improve public transport which is generally lacking in the country, ensure regular services as well as ensure an efficient shuttle bus system for better convenience to passengers.
Therefore, we are of the view that any subsidy program by issuing electronic subsidy cards to the poor and to control food prices more effectively is one of the priorities to improve the living standards of the people. Such electronic subsidy cards are relatively easy to implement as the government already has a database of B40 recipients for various forms of assistance and the Inland Revenue Board of Malaysia (IRBM) also needs to have data on those who are in the lower M40 group.
