Brace yourself for fuel subsidy cut; RM 4 billion worth of petrol subsidies paid as of March

The Ministry of Finance (MoF) is looking into new subsidy mechanisms that will focus on the B40 income group. Currently, the fuel subsidy overwhelmingly benefits the rich or the T20 group instead of the lower income B40 group. 

In an Astro Awani report, Tengku Zafrul explains that the subsidies are expected to exceed RM 30 billion for the whole year (including electricity and LPG), of which more than RM 15 billion will benefit the T20 group instead. He highlighted that this includes more than RM 4 billion worth of petrol subsidies in March.

This is because the subsidies provided by the government were comprehensive and benefitted all levels of society. However, with the inflation and the unrest between Russia and Ukraine, this method may no longer be feasible.

“For every RM 1 of fuel subsidy, 53 cents goes to the T20 group, while 15 cents is utilised by the B40,” he said according to an Astro Awani report.

Hence, this has prompted the government to look into creating new electricity and petrol subsidy mechanisms to ensure it was more targeted and focused on the vulnerable.

“In Feb 2021, the subsidy for petroleum products borne by the government was only RM200 million. However, by Jan 2022, it was RM2 billion and in March, it was more than RM4 billion.

“Meanwhile, for the electricity subsidy in the first half of 2022, the government will maintain the electricity tariff for all homes, large and small, with a subsidy cost of about RM700 million,” he said.