pic by TMR FILE

THE government is reviewing the petroleum products subsidy mechanisms to ensure that they will directly benefit the needy.

Deputy Finance Minister (1) Datuk Mohd Shahar Abdullah said that the current subsidised prices are enjoyed by all, regardless of rich or poor, while high-income groups enjoy more subsidies as they use more fuel.

“Looking at this situation, the government is reviewing the mechanisms of petroleum product subsidies, so they can be implemented to more targeted and focus aid of subsidies to the vulnerable and those who are really in need,” he said in a response to Kubang Pasu MP Datuk Wira Amiruddin Hamzah and Jempol MP Datuk Seri Salim Sharif’s queries in the Dewan Negara yesterday.

Read more: Fuel subsidy to offset higher oil revenue

He said that the targeted subsidies are expected to optimise the government’s financial resources.

“Meanwhile, the savings can be redistributed for more effective programmes contributing to the wellbeing of Keluarga Malaysia,” said Mohd Shahar.

As of January 2022, the price of crude oil is US$85 (RM359) per barrel, from US$55 per barrel in the same period last year, according to Mohd Shahar.

Read more: Govt to provide RM8bil in fuel, oil subsidies

Therefore, he said that the government had to cover a significant increase in subsidies for petrol, diesel and liquefied petroleum gas (LPG) up to 10 times to more than RM2 billion for January 2022.

He said that for every US$1 per barrel increase in crude oil prices will bring RM300 million in extra revenue to the government.

“But every US$1 per barrel will have an implication of RM600 million and it is not break-even as we implement a ceiling price. For example, we [have] set a ceiling price of RM2.05 per litre for RON95, but the actual price is RM3.70 per litre and the government bears RM1.65,” Mohd Shahar explained.

He said the government would consider several medium-term tax measures, including options to reduce the reliance on direct taxes and broaden the revenue base by shifting to tax based on consumption, such as exploring the scope of taxes and the Sales and Service Tax rate.

Read more: Thailand Bans Use of Cryptocurrencies as a Method of Payment

On a separate matter, he said that the government does not intend to recognise cryptocurrencies as a legal currency in Malaysia.

“In line with the government’s stance, cryptocurrencies such as Bitcoin are not suitable to use as a payment instrument due to various limitations.

“These include significant price fluctuations, exposure to cyber threats, lack of scalability and substantial adverse environmental effects,” he said in a reply to Senator Datuk Seri Zurainah Musa.

However, he noted that Bank Negara Malaysia (BNM) is accessing another digital currency, which is the central bank digital currency (CBDC).

“Unlike cryptocurrencies, CBDC is digital currencies issued by central banks to achieve public policy objectives such as improving the efficiency of cross-border payments and advancing financial summaries,” he said.

Moreover, BNM has partnered central banks in Australia, Singapore and South Africa through the Dunbar project to develop a prototype platform that enables international solutions to use various CBDCs.

Previously, Deputy Communications and Multimedia Minister Datuk Zahidi Zainul Abidin has proposed that digital currencies such as cryptocurrency be adopted as legal tender to help the younger generation who are active users of the currency, especially on non-fungible tokens trading platforms.

However, he said that the adoption of digital currencies is under the purview of BNM and the Securities Commission Malaysia.