Govt’s next challenge after setting new diesel price: Anxious consumers with questions about Budi Madani subsidy programme

Malay Mail
Malay Mail

KUALA LUMPUR, June 10 — After announcing that the diesel pump price is now set at RM3.35 per litre, the Anwar administration will be facing a new hurdle – Malaysians who are unhappy and/or anxious about the targeted subsidy rationalisation move that replaced the previous blanket subsidy.

Their primary apprehension stems from the potential for another round of price hikes for essential goods that could drive up their monthly household spending, a scenario they say is based on an all-too-familiar consequence of previous fuel price increases.

Penang-based entrepreneur T. Prem Kumar questioned why only diesel was targeted when the consumption pattern is similar to petrol vehicles.

The farm owner said that he spends about RM400 a month on average on diesel for his private vehicle which he uses to also do delivery, before yesterday’s announcement and is bracing for the additional cost now.

“If smuggling is the concern, then border control should be tightened. There should be supplementary actions to make things foolproof. This move today brings more questions than answers.

“Diesel until recently, was cheaper than petrol and that is why people use it. It was a cheaper alternative, but right now that is not the case,” Prem told Malay Mail when contacted.

Another motorist who has been using a diesel-powered car for getting around the Klang Valley expressed worry over living costs with the targeted subsidy. "I fear the increase in diesel will affect the general cost of living. This increase is a big jump. It doesn't give time for the users to get adjusted gradually,” said Petaling Jaya-based YS Tan.

She said that her family’s monthly diesel expenditure for in-town travel, previously around RM200, could now soar to the RM300-RM350 range following the price cap.

Tan said that she would still use her diesel vehicle to get around town, but will consider using the family’s petrol vehicle for their long-distance travelling.

“What is needed is better enforcement on detecting where the leakage is and prosecuting the culprits accordingly. There needs to be better custom control to catch smugglers,” she added.

Fuel price hikes have historically triggered a ripple effect across various sectors, including public transportation, manufacturing, construction, and the food industry, amplifying the burden on consumers.

Yesterday, Second Finance Minister Datuk Seri Amir Hamzah cited a sharp rise in subsidised diesel from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite insignificant growth in diesel-powered vehicles.

He said by implementing targeted subsidies and plugging in leakages, the government is expected to save RM4 billion a year.

The minister also said that the high diesel prices in neighbouring countries have contributed to illegal consumption by foreigners and smuggling — around RM4 per litre in Thailand, and RM9 per litre in Singapore.

Contractor Ahmad Sofwan said he now faces the difficult choice of either increasing service fees for clients or accepting lower profits, both which he saw as unfeasible options.

Sofwan warned the change could exert pressure on small businesses, potentially leading to higher prices for consumers.

“There should have been consideration for other diesel users, especially daily drivers. This will also strain small businesses and could lead to higher prices for consumers overall.

“Additionally, it may force some companies to cut back on operations,” he added.

Many Malaysians took to social media platform X to complain that the price increase of RM1.20 per litre of diesel is excessive and will inevitably lead to inflation and higher costs of goods.

“Sorry but we have to address the diesel subsidy issue because the price hike of RM1.20 per litre is just too much.

“No matter how you cover it, it will still lead to inflation and a significant increase in the cost of goods," said user @sobrifd.

Another user @ApaCeritaMike questioned how business owners and 4WD vehicle users will cope, lamenting that it is already taxing to pay monthly car instalments, adding that it would be impossible to pass the cost onto customers.

“I use 120 litres of diesel a week. Multiply that by a month, 480 litres times RM3.35 per litre. Where am I supposed to find that money?” he asked.

Malaysia is among a few countries in South-east Asia where diesel prices have been regulated instead of being floated at fluctuating global market prices.

In his monthly address to civil servants this morning, Prime Minister Datuk Seri Anwar Ibrahim said the government’s decision to implement targeted diesel subsidies is necessary to save the country.

“Who wants this targeted subsidy? We must also know that whatever we do, we will be severely criticised with all sorts of slander and lies.

“In fact, we have said that all prime ministers before this had agreed on the targeted subsidy, but there was no political will to implement it because of the risks involved. However, to save the country, we have no choice,” said Anwar, who is also finance minister.

Last month, he announced that the Cabinet approved the start of the diesel subsidy rationalisation programme, which is expected to save the government around RM4 billion a year.

He said that the initiative will initially target users in peninsular Malaysia only and will not involve those in Sabah and Sarawak.

In April, Anwar said the government’s move to implement targeted subsidies is aimed at ensuring that the benefits are truly enjoyed by 80 to 85 per cent of the population.

He said the move also aims to prevent the wealthy and the estimated 3.5 million foreigners in the country from benefiting from subsidies.

Yesterday, Second Finance Minister Datuk Seri Amir Hamzah cited a sharp rise in subsidised diesel from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite insignificant growth in diesel-powered vehicles. — Picture by Shafwan Zaidon
Yesterday, Second Finance Minister Datuk Seri Amir Hamzah cited a sharp rise in subsidised diesel from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite insignificant growth in diesel-powered vehicles. — Picture by Shafwan Zaidon

Yesterday, Second Finance Minister Datuk Seri Amir Hamzah cited a sharp rise in subsidised diesel from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite insignificant growth in diesel-powered vehicles. — Picture by Shafwan Zaidon

How will the new diesel price affect you?

This only applies to peninsular Malaysia, for now.

• If you are a private owner of a diesel vehicle, you may be eligible for the Budi MySubsidi Diesel programme.

• If you are a company using diesel vehicles for public transportation, school buses, local buses, express buses, ambulances, firefighters. hearses and logistics, you can apply for the Subsidised Diesel Control System (SKDS) fleet card.

• Under the SKDS, 33 types of transport can apply for a fleet card to get a subsidised price. There is no deadline for its application.

For more details, read Malay Mail's wrap-up: All you need to know about: Malaysia’s new diesel price of RM3.35 per litre