Targeted subsidy for RON 95 petrol has to be done because of subsidy leakage, which benefits groups who are not supposed to enjoy subsidies. According to second finance minister Datuk Seri Amir Hamzah Azizan, based on current data, it is estimated that over 40% of petrol usage is by foreigners, the commercial sector and smuggling.
“As the level of RON 95 petrol subsidy is around RM20 billion a year, if leakage to foreigners, the commercial sector and the rich can be solved, it’s bound to save up to RM8 billion a year,” Amir Hamzah told parliament today, reported by Bernama.
The senator and former EPF CEO also touched on the removal of blanket subsidy for diesel, which happened in June this year. Based on the latest data, Amir Hamzah said that there’s a drastic drop in the sales of diesel at the pumps, which points to the reduction of smuggling.
He said that diesel sales at pumps are down by 25%, or nearly seven million litres per day, while commercial diesel sales are down by nearly 50%, or four million litres a day. This shows that industries have stopped buying subsidised diesel. “Based on early data, targeted diesel subsidy has so far saved (the government) around RM600 million a month,” he shared.
As announced in Budget 2025 by prime minister Datuk Seri Anwar Ibrahim, targeted subsidy for RON 95 petrol will come into place from mid-2025.
With the timeline set, the two big things left to be determined are ‘who will be excluded’ (T15 maha kaya was mentioned in the budget, but the PM has since walked back – it could even be T10, still under discussion) and the mechanism (direct cash handout/no two-tier price at pump, MyKad or vehicle type, as some have suggested).
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