Up to 6 months study needed before MoF can implement new targeted fuel subsidy mechanism

The Finance Ministry is currently testing a mechanism for targeted fuel subsidies. Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz said that it will take three to six months of study before it can be implemented nationwide.

The government has been talking about removing the blanket subsidies on fuel since crude oil prices started rising earlier this year. As of May 2022, the government has paid RM 4 billion worth of fuel subsidies.

“The testing will be followed by more extensive evaluation in terms of other methods as well as determining the feasibility of such a mechanism not only in urban areas but also rural ones.

“The development and testing of a targeted subsidy system is expected to take a period of between three and six months before it is ready for implementation nationwide,” he told the Dewan Rakyat yesterday (19-July-2022).

Also read: At RM 37.3 bil, Malaysia spends more on fuel subsidies than healthcare

Other than that, Tengku Zafrul also mentioned that the new mechanism will be rolled out in stages to ensure that it does not result in sudden inflation or affect the momentum of economic growth.

“In line with this approach, the government will not increase the price of fuel to reflect the market price without subsidies given its impact on inflation, even though the RON95 price of RM2.05 per litre is approximately 50 per cent that of the real price without subsidies.

Also read: Say goodbye to blanket petrol subsidies soon, government putting forward targeted assistance

“Thus, the government’s strategy is to ensure the replacement of bulk subsidies with a combination of targeted subsidies and cash assistance in stages,” he said.

On another note, Tengku Zafrul said the inflation rate in Malaysia is moderate and under control at 2.2 percent for the first and second quarters of 2022.

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