Too soon to predict inflation with RON95 price float


IT IS too early to tell if the decision to float RON95 price, following the targeted fuel subsidy scheme, would cause any inflation.

Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail said it is best to focus on the government’s commitment to fulfil promises made in the election manifesto.

“We are currently identifying the number of fuel subsidy recipients and I would welcome if the data is not complete, we are open for the opt-in and opt-out options” he told reporters at the Parliament lobby yesterday.

The subsidy scheme, however, will not incorporate East Malaysia as the price of RON95 there will remain capped at RM2.08 per litre.

“RON95 consumption is relatively lower compared to Peninsular Malaysia, as they generally use more diesel there,” Saifuddin Nasution added.

He also highlighted that fuel traders and operators forecasted the global oil price to remain at around US$50 (RM209.50) and US$60 per barrel next year.

“We can have an estimate on the fuel price quantum if oil prices continue to maintain at those levels,” he said, adding that a surge in price would otherwise impact negatively.

On Monday, the government announced that the price of RON95 will float according to global market price once it rolls out its targeted petrol subsidy initiative in January next year.

Under the initiative announced by the Domestic Trade and Consumer Affairs Ministry, only recipients of the Bantuan Sara Hidup (BSH) based in Peninsular Malaysia are entitled.

As for the BSH recipients, their cars must be between 1,600cc engine and below, or 1,600cc and above which are at least 10 years old.

For motorcycles, the engine displacement must be 150cc and below, or above 150cc, if they are seven years old and above.

The subsidy rate will be capped at RM30 monthly for cars and RM12 monthly for motorcycles.

Eligible recipients will receive RM48 (motorcycle) and RM120 (car) every four months.

So far, about 2.9 million BSH recipients who have vehicles with valid road tax would get the petrol subsidies from Jan 1, 2020.

“Only those who are entitled for cost of living aid assistance, with their names listed in the BSH database for receiving such allowances, will be able to receive the new petrol subsidy. All handicapped people will also be given the subsidy,” Saifuddin Nasution said.

It will cost the government about RM65.4 million a month, lower than the average RM133 million the ministry says it currently spends weekly on fuel subsidies.

The petrol subsidy scheme, however, only allows for one car per individual in the bottom 40% (B40) income group.

Prime Minister Tun Dr Mahathir Mohamad said the decision was made after a study by the government found that some individuals in the B40 group owned up to six cars.

A check showed that without the price cap in place, RON95 petrol would be priced at RM2.30 per litre this week, based on the Finance Ministry’s automatic price mechanism calculations.

For the previous week, the price would have been RM2.49 per litre without the cap.