Ron95_diesel_up_2

The structure and mechanism of the new petrol subsidy rationalisation programme for RON 95 that is supposed to come into effect next June has not been finalised, says the government. According to Deputy Finance Minister Datuk Chua Tee Yong, the subject is still being studied and details of the new system are not expected to be revealed until next year.

Chua told reporters over the weekend that discussions are ongoing, and will involve relevant agencies, organisations and ministries. “At the moment, we are still studying the system. We also have to look into the agencies that will help us successfully implement it,” he said.

He added that the income bracket or group that will continue to enjoy subsidised fuel with the subsidy rationalisation would need to be identified. Last Thursday, it was reported that the programme would involve the MyKad and be based on a motorist’s income level.

A dual-pricing system for RON 95 is set to be implemented – those belonging to a ‘high-income group’ will have to pay the full market price for RON 95 petrol (RM2.58 per litre, at current price), while individuals classified under the ‘low-income group’ will be able to continue filling up at the current subsidised rate of RM2.30 per litre.

UPDATE: Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah has revealed that those earning below RM5,000 per month will receive full subsidy, while those earning between RM5,000 and RM10,000 will get partial subsidy. No subsidised fuel for those earning five figures a month.

The use of the Mykad as a tool to determine subsidies has raised the question of whether it will incorporate data from the Inland Revenue Board (LHDN) showing how much one earns.

petrol11

Chua however pointed out that the public should not speculate that the government has already finalised the system or its full workings. “An announcement will be made once the Cabinet gives the approval,” he explained.

He stated that subsidy rationalisation was an important step for the development of the country, and added that the government wants to ensure that only those who qualify for subsidy benefit from the new system.

Determining this will be the challenge, according to Federation of Malaysian Consumers Associations (Fomca) deputy president Mohd Yusof Abdul Rahman. “Firstly, the government has to narrow down on those eligible to receive the subsidy, secondly, remove from the list the industries not qualified for the subsidy, and thirdly, the government needs to fix the leakages and then only, turn to the domestic consumers,” he told Bernama.

He added that the government should also provide a clear definition of the ‘high-income group’ because it differed according to the situation and where they were located. “Those earning RM5,000 to RM10,000 are still pressured by the rising cost of living in the city,” he told the publication.

Meanwhile, the NST reports that Malaysian Muslim Consumers Association chief activist Datuk Nadzim Johan has suggested that the programme have tiers for different levels of income.

Petrol_Subsidy_Sept_ 001

He said that for the system to work, the government will need to have comprehensive data on individuals’ incomes and assets, and the declaration of these as well as debts will provide the government with a clearer picture of an individual’s actual purchasing power and define the tier he/she will fall under.

“If a person drives a small car, for example, he or she will need a certain amount of petrol each week. For someone with a fixed income of RM3,000 a month and who drives his father’s luxury car, he uses a different amount of petrol than a person driving a smaller car. How will the government address and solve this?,” Nadzim said.

He suggested that those eligible for subsidised fuel should be allotted a specific amount of fuel each week. The limit for each individual will prevent others from different tiers from using others’ monthly allocation. “Once an individual finishes his allocation, he or she can purchase fuel at non-subsidised rates until the week or month ends, depending on which cycle the system adopts,” he said.

On October 2, the price of RON 95 petrol and diesel went up by 20 sen to RM2.30 and RM2.20 per litre respectively. At that point, the actual market price was RM2.58 per litre for RON 95 and RM2.52 for diesel, translating to a current subsidy rate of 28 sen per litre for petrol and 32 sen for diesel.

In Budget 2015, tabled on October 10, PM Datuk Seri Najib Razak announced that RON 95, diesel and LPG is to be exempted from the Goods and Services Tax (GST) that will come into effect in April 2015. As for unregulated RON 97, its pricing will be subject to the 6% GST – currently, it is priced at RM2.75 per litre.