Petrol subsidy implementation likely to be postponed

Revision paper for the fuel subsidy mechanism yet to be brought up in the Cabinet as ‘more details’ need to be reviewed

by AFIQ AZIZ / pic by TMR

THE targeted fuel subsidy may not be implemented as scheduled in July as the government requires more time to find an ideal mechanism to channel it to about 6.6 million recipients.

According to Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail, the revision paper for targeted fuel subsidy mechanism has not been brought up in the Cabinet, as the ministry needs to review “more details” of the proposal.

“The proposal paper is yet to reach the Cabinet as we still have to go through a few more details,” he told the press in Putrajaya yesterday, without mentioning any timeline for the revision to be completed.

It was first reported that the government had planned to use a dedicated system in which eligible users would be given a discount card or coupon for the petrol disbursement with some RM2 billion allotted for the purpose.

However, Saifuddin Nasution said in Dewan Rakyat last month that it would be more practical to wire the money to recipients’ bank accounts as 90% of them hold a bank account.

The ministry is currently waiting for the Bantuan Sara Hidup (previously known as BR1M [1Malaysia People’s Aid]) secretariat to submit the latest updated list of recipients, before the fuel-subsidy proposal could be presented.

Petrol Dealer Association of Malaysia president Datuk Khairul Annuar Abdul Aziz said the industry players are still in the dark as to when the implementation will take place.

“We are still in the dark on this and awaiting for the next move. However, we are always supportive of the proposal to deposit the money to consumers’ accounts,” he told The Malaysian Reserve (TMR) yesterday.

Early this year, Finance Minister Lim Guan Eng revealed that the subsidies for RON95 between January and November 2018 totalled RM4.1 billion.

Brent crude oil price at that time was hovering between US$62 (RM258) and US$86 per barrel.

The price has been surging from US$55 per barrel in January to around US$71 last week.

There is concern that the global oil market would influence the government’s ability to implement the targeted subsidy.

Khairul Annuar, however, said the global trade war issues have been ongoing and it is hard to predict the oil price trend.

“Hopefully by the time of the targeted subsidy implementation, the market price would be lower,” he said.

Meanwhile, Institute of Strategic and International Studies director of economics, trade and regional integration Firdaos Rosli (picture) said the delay of the implementation has been expected due to the complexity of getting the right authority to monitor the execution, as well as to balance out between the oil subsidies given over the income growth.

“The hard part to the whole equation, on one hand is the election promise. So, whether or not they are going to roll it out according to how they have imagined before, or how things have become today, they will still have to do it.

“But on the other hand, the real impact of this introduction — assuming that if the implementation is being done in a smooth way, it is going to be very much ‘muted’,” he told TMR.

Firdaos said by having targeted oil subsidy, the government is effectively suppressing cost to a fictitious level.

“While we are thinking that price is going down because of subsidy, the fact is that, your income will never go up. Inflation will not happen organically, hence, there will be no reason or basis for employers to provide incentives for income growth.

“Then, you will see that employers will continue to have a strong opinion about minimum wage,” Firdaos said, adding that the implementation may be hard to translate into a better livelihood.