It’s official: the government confirmed this morning that it will extend the full RON95 petrol subsidy to all Malaysians. And just like that, the big fight over targeted subsidies – arguably the centrepiece of the current Madani government – has fallen by the wayside.
To be fair, the new price of RM1.99 per litre will be limited to a quota of 300 litres per month before reverting to RM2.60 per litre (to be floated based on market price), with the exception of registered e-hailing drivers who will receive the lower amount throughout. The use of MyKad verification also further discourages foreigners from smuggling subsidised petrol across borders.
Still, this move is a significant departure from what was previously announced, with prime minister Anwar Ibrahim saying then that a subsidy rationalisation plan was necessary to “optimise national resources for the benefit of the people and reduce subsidy waste.”
Talks of targeted subsidies began not long after the current government came to power – we first reported on it in December 2022, and even the previous government had mulled such a mechanism. Subsidies were then cut for diesel in 2024, but the rationalisation plan for RON95 petrol was repeatedly pushed back, first to the second half of 2024, then to mid-2025, then finally to September 2025.
All the while, we were assured that targeted subsidies were necessary to “save the country;” that the government had “no choice,” that Malaysia should stop giving subsidies to the rich, and that 90% of Malaysians (later, 18 million car drivers and motorcyclists) would be eligible, with only the “extremely wealthy” being left out. Well, that figure is now a full 100%.
The extension of subsidies to all literal card-carrying Malaysians blindsided everyone, including us. Just last month, it was reported that luxury vehicle and property ownership would be among the criteria determining which individuals would get the subsidy and who didn’t. Even as recently as last Friday, when home minister Saifuddin Nasution Ismail advised Malaysians to make sure that their MyKad chip was functional in order to enjoy the lower RON95 price, it was clearly stated that the subsidies would still be targeted.
It’s worth noting that for all the talk of targeted subsidies being necessary to reduce the budget deficit, the reduction in RON95 price from the current level of RM2.05 per litre means there will probably be more subsidies for the government to pay out, compared to leaving the current subsidies alone in the first place.
And while there is a nominal limit for the amount of petrol each person can purchase, the 300 litre quota is far more than one single person can expect to use every month. Not to mention, this quota is exactly the sort of thing a wealthy person can bypass by simply buying a more fuel-efficient car – something that cannot be said for, say, a lower-income individual with older, less efficient transport.
The government has also repeatedly said that this measure will prevent foreigners from benefitting from our subsidies, but it also bears repeating that foreign cars are already barred from using subsidised fuel, and that foreign citizens owning private vehicles in Malaysia are few and far between anyway.
Plus, while the MyKad requirement is a deterrent, it won’t completely stop all forms of smuggling, since foreigners can simply ask a Malaysian family member or friend to fill up for them. All this put together makes us wonder how much the government realistically expects to save from this.
As you can imagine, there are several questions. For one, it is pretty obvious that the government does not have the stomach to tax the super-rich. We have already seen the mooted High Value Goods Tax (HVGT) get canned, so this move is not unprecedented. So, will the greater rakyat pay for this subsidy in other areas?
Just this morning, even as news of the subsidy expansion broke, The Star reported that on Friday, Anwar said savings from targeted subsidies would be spent on “education, health, and basic infrastructure,” including public infrastructure damaged by the ongoing Sabah floods. What will happen to those initiatives?
Secondly, it still hasn’t been answered whether the MyKad verification requirement will lead to long queues at petrol station counters. We’ve only seen the in-store credit card terminal with the card slot so far, and while the government has said that at-pump terminals and petrol company apps will also be able to verify a user’s eligibility, we should point out that a) not every pump has a credit card terminal, and not everyone uses an app to pay for fuel, and b) we still have no details as to how these options will work.
Thirdly, with the RON95 fuel price its lowest since 2019, will demand for EVs continue to plummet? If so, the government will have to extend its current tax incentives if it is to meet its target of EVs to make up 15% of vehicle sales by 2030. Except it won’t be able to afford doing so now, will it?
Last but not least, what will happen to diesel subsidy rationalisation? The expansion of RON95 to all Malaysians will seem unfair to those using diesel vehicles – which, in case you need a refresher, get RM200 a month only if they are Malaysians with an annual household income of less than RM100,000 (no more than RM8,333 per month) and don’t drive a luxury car less than ten years old.
The MyKad verification mechanism also appears to be light years ahead of the rather rudimentary Budi Madani system for targeted subsidies; will this be upgraded?
Over to you now – what do you think of the expansion of RON95 subsidies to all Malaysians? Do you agree or disagree with the implementation? Let us know in the comments.
