Part of the M40 group may be cut off from the targeted fuel subsidy that is being planned for introduction by the government, which would reduce their spending power, said Kenanga Research.
In a sector update report issued on Wednesday, the research arm of Kenanga Investment Bank anticipated that the upcoming targeted fuel subsidy will be unveiled during the tabling of Budget 2024 on October 13. It added that the new mechanism, which is expected to replace the existing blanket fuel subsidy, is likely to come into effect at the start of 2024.
It said the move is largely motivated by the unsustainable financial burden of the current existing blanket fuel subsidy setup, where a considerable 35% of the RM77.3 billion subsidy in 2022 that was utilised for fuel subsidies benefitted the wealthier T20 group.
Utilising the Pangkalan Data Utama (PADU) socio-economic database, which will integrates data from various government agencies including the inland revenue board (LHDN) and the road transport department (JPJ), the government aims to identify recipients using a ‘net disposable income’ criterion, intending to largely exclude the T20 demographic, the research arm stated.
Despite this, Kenanga Research believes that a large part of the M40 group will likely still be inadvertently excluded from the targeted fuel subsidy system, possibly resulting in lower disposable income and reduced spending power for the group.
However, it added that the B40 group will continue to fully enjoy subsidised fuel, and as such would not encounter any erosion in spending power. “Additionally, the group will continue to receive financial assistance from the government, including cash handouts,” the research arm added.
The timeframe for the planned implementation of the targeted subsidy programme mirrors that stated by economy minister Rafizi Ramli, who said the government is expecting to have it in place by early next year.
The mechanism of the programme itself has not been detailed, but the government says it is exploring various ways to implement targeted subsidies, including an ID system and, most recently, using the MySejahtera application.
Of course, it remains to be seen how effective the targeted policy will be, and whether say, traders and those in small-to-medium businesses will be covered by the mechanism. The bigger picture is how any rise in the price of goods and services – which could potentially come about and impact all income groups, including the M40 and B40 – can be staved off. The answers, in due course.
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AI-generated Summary ✨
The comments mainly discuss concerns about fuel subsidies and their distribution, with many believing subsidies are unfairly benefiting the rich, including T20 and M40 groups, while the B40 often remains marginalized. Several commenters advocate for targeted subsidies like direct cash transfers or limiting benefits to ensure fair distribution and reduce government spending. There is frustration over the perceived misuse of subsidies by foreigners and larger corporations, and calls to eliminate blanket subsidies to cut the national deficit. Some express skepticism about current data and policies, questioning how subsidies are allocated and suggesting reforms for transparency and efficiency. Overall, sentiments lean towards the need for reforming fuel subsidy schemes to ensure they benefit the intended low-income groups rather than the affluent.