Current fuel subsidy to be reviewed, targeted subsidy for needy instead, says Tengku Zafrul

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KUALA LUMPUR: The present fuel subsidy will be reviewed in favour of a targeted programme for the needy due to the sharp rise of world crude oil costs, says Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz.

He mentioned that the federal government might be paying up to RM28bil in subsidies for petrol, diesel and liquefied petroleum fuel (LPG) for 2022, because the Russian-Ukrainian warfare has pushed crude oil costs over US$100 (RM418) per barrel, the best stage seen since 2014.

He mentioned crude oil costs have been rising considerably since 2021, costing US$85 (RM356) per barrel in January this yr in contrast to US$55 (RM230) throughout the identical month final yr.

Tengku Zafrul added that the spike in international crude oil costs have prompted the federal government to bear a tenfold improve within the subsidy invoice for petrol, diesel and liquefied petroleum fuel (LPG) from RM200mil in January 2021 to over RM2bil in January this yr.

The Russian invasion of Ukraine additional escalated crude oil costs, to over US$100 (RM418) per barrel, and it’s now anticipated that the subsidy for petrol, diesel and LPG will price the federal government greater than RM2.5bil a month, he mentioned.

“If the global crude oil prices remain at over US$100 (RM418), the overall cost of subsidy for the whole of 2022 is expected to reach RM28bil compared to RM11bil in 2021,” added Tengku Zafrul.

He said that under the current programme, the same subsidised prices are enjoyed by all, regardless of rich or poor and added that the high-income group will enjoy more subsidies based on consumption levels, which are larger, compared to those on low incomes.

“Therefore, the government will review the fuel subsidy mechanism in order to implement a more targeted and focused aid and subsidy to the vulnerable and those really in need,” Tengku Zafrul advised the Dewan Rakyat throughout the Minister’s Question Time on Thursday (Mar 10).

He additionally mentioned that the federal government can not borrow for working bills resembling subsidies and due to this fact the rise in subsidy price should be offset by elevated income and value financial savings by the federal government.

Thus, the implementation of targeted subsidies is predicted to optimise the federal government’s monetary sources and the financial savings obtained can be redistributed for more practical packages that may in flip contribute to the nicely being of the individuals, mentioned Tengku Zafrul.

He added that customers in Malaysia have continued to get pleasure from retail fuel costs of RM2.05 per litre for the RON95 grade petrol however that the precise price in March had reached RM3.70 per litre.

He then mentioned that this meant that the federal government had to cowl the distinction of RM1.65 per litre.

“For example, every time we refuel with a value of RM100 or about 49 litres, the amount paid by the government is RM81 because the actual cost based on market price is RM181 for 49 litres of RON95,” said Tengku Zafrul

“This means the government subsidy is up to 45% of the total price. As for diesel, consumers only pay RM2.15 per litre while the actual cost has exceeded RM4 per litre,” he added.

Tengku Zafrul additionally mentioned that the massive hole between the retail worth on the petrol station in contrast to the precise market worth can even end in the next danger of subsidy leakage brought on by petroleum merchandise being smuggled out of Malaysia to neighbouring international locations, which have larger retail petrol costs.

The RM2.05 per litre retail worth of petrol in Malaysia is comparatively low in contrast to oil-producing international locations resembling Saudi Arabia, the place it’s RM2.59 per litre, and in addition when put next to neighbouring international locations resembling Indonesia at RM3.74 sen per litre, Thailand at RM5.63 sen per liter and Singapore at RM9.16 sen per litre, mentioned Tengku Zafrul.

Earlier, Wong Hon Wai (PH-Bukit Bendera) requested the Finance Minister whether or not a coordination of petrol, diesel and subsidy programmes wanted to be completed given international crude oil worth and pure fuel have risen sharply throughout the Russian-Ukrainian warfare.

Tengku Zafrul added that the federal government can also be presently within the means of reviewing how the targeted subsidy strategy can be expanded to different subsidised merchandise in order that the subsidies can be centered on these actually in want.



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