KUALA LUMPUR, October 13 — The introduction of a targeted electricity subsidy system in Malaysia has proven successful, leading to a significant reduction in subsidies for the highest electricity users without increasing tariffs for the vast majority of consumers. Prime Minister and Finance Minister Anwar Ibrahim, during the unveiling of Budget 2024, reported that this targeted approach significantly reduced subsidies for the top 10% of electricity consumers in the country. Under the previous indiscriminate subsidy system, which favored the rich, the highest 10% of electricity users received 50% of the government’s total electricity subsidy in 2022.
In contrast, the lowest 50% of electricity consumers, who used the least electricity, received only 10% of the subsidy. Anwar highlighted that this shift in subsidy distribution is projected to save the government more than RM4.6 billion in electricity subsidies this year while keeping electricity tariffs unchanged for 90% of consumers. This change reflects a substantial decrease in the government’s spending on subsidies compared to the approximately RM20 billion allocated at the beginning of the year.
The targeted electricity subsidy was introduced in June, including a 10 sen per kWh surcharge for users consuming more than 1,500kWh of electricity per month, as part of the government’s Imbalance Cost Pass-Through (ICPT) mechanism for the second half of 2023. This surcharge was estimated to impact only around 83,000 households, representing 1% of all households. Furthermore, the government intends to refine its targeted electricity subsidy system by considering the electricity usage of individual households. This approach is expected to promote more efficient and economical electricity usage among consumers.
In conclusion, Anwar announced that the government will continue providing a RM40 per month electricity bill rebate to low-income households, allocating RM55 million for this purpose. Additionally, the security deposit for homeowners who pay their own electricity bills will be eliminated as part of these initiatives.
