Prime Minister Anwar Ibrahim announced today that petrol prices would be even lower than they are now for the less-than-wealthy in Malaysia.
We were all waiting for the special Rakyat Appreciation Wednesday announcement by the Prime Minister and now we finally have it. There are a couple of transport related announcements – the first being the price of fuel and the other bring the toll rates.
Regarding fuel prices, Prime Minister Anwar confirmed that RON95 petrol would be priced at RM1.99 per litre once the targeted fuel subsidy kicks in later this year. While there are still no details on when exactly this new targeted fuel subsidy will arrive, what’s clear is that it will arrive this year, as planned and that the new pricing, which is RM0.06 cheaper per litre than the current blanket subsidy, will apply to about 18 million Malaysian vehicle users. The mechanism for the targeted subsidy has yet to be disclosed.
Under the current blanket subsidy, the Malaysian government is spending something like RM20 billion a year to keep prices where they are. This method of subsidizing fuel is a little inequitable. Not only do the rich benefit from it, but they can disproportionately benefit from it by using more subsidized fuel on more powerful vehicles as there is no cap on the use of subsidised fuel for each individual. The only way for a T20 to ‘opt-out’ of subsidized fuel would be to fuel up using RON97 or RON100 instead and not all engines are suited to these fuels.
Currently, RON95 WITHOUT the subsidy would be around RM2.50 a litre, so on the flip side many Malaysians who are earning above average incomes will suddenly be spending RM0.45 per litre more on petrol where the majority will be saving RM0.06 per litre.
Besides the fuel price announcement, Prime Minister Anwar also announced that there would be no toll rate hike in 2025. To be clear, the government has to spend RM500 million to ensure this savings get passed to the rakyat, so it’s not just that highway operators are forgoing the income. 10 highway operators were scheduled to see toll rate hikes this year, many of which are within the Klang Valley.
