In early June 2024, the Malaysian government, through the Ministry of Finance, announced that they would be retracting the blanket diesel subsidies which had been in place previously. Subsidised diesel prices for Malaysia previously stood at RM2.15 per litre and will now be floated at market rate. Currently, the price has risen to about RM3.35 a litre.
There has been much talk about this rise in diesel price and how it affects the common person. Will it have a strong impact on our lives as claimed by some parties? Let's explore this news in more detail.
Why is Malaysia Retracting Diesel Subsidies?
Albeit not a new plan, this bold and unpopular move by the government is a long time coming. As an oil producer, Malaysia has long enjoyed subsidised petrol rates, whereby its cost of fuel is significantly lower than its ASEAN neighbours.
As such, Malaysian fuel, especially diesel, has been a target of smuggling, especially at the borders. In some cases, non-Malaysian vehicles or vehicles owned by non-Malaysian entities have also enjoyed this cheaper subsidised fuel. In one example, Singapore tour operators who have thus far enjoyed the fruits of the blanket diesel subsidy, are now forced to raise their prices with the said subsidy retraction.
Cheap diesel theft is a major leakage of the nation's funds, leading to billions of Ringgits lost every year. In fact, targeted subsidies will help the nation save up to RM4 billion per year. With targeted subsidies, only certain groups of Malaysians who are meant to enjoy affordable diesel will be able to do so.
Who Benefits From Targeted Diesel Subsidies?
The new targeted diesel subsidization move ensures that only those who need it truly benefit, rather than fuel smugglers who often buy them cheap and sell them at a higher price over the borders. With this system, certain Malaysian stakeholders will continue to enjoy diesel at a subsidised rate. Here they are, and the diesel rate they will enjoy:
Sabah&Sarawak : Diesel remains at a subsidised price of RM2.15 per litre, same as previously
Logistics vehicles: To remain at RM2.15 per litre. They will enjoy diesel subsidy under the Subsidised Diesel Control System (SKDS) 2.0 to mitigate price increases on consumer goods via fleet cards to eligible operators.
Public transport: Diesel remains at RM1.88 per litre under Subsidised Diesel Control System (SKDS) 1.0 for land public transport, including school buses, express buses, ambulances, and fire engines.
Fishermen: Subsidised diesel remains at RM1.65 per litre
All operators and companies that fall under these categories should apply for their fleet card with the government in order to enjoy these subsidies, if they have not done so already.
Individuals with diesel vehicles, small time farmers, and commodity smallholders are eligible for Budi Madani, and should apply for it on the website to enjoy cash aid to offset for their diesel costs.
The Budi Madani programme allows individual diesel vehicle owners and small time agricultural practitioners to enjoy a cash aid of RM200 per month, enough to offset the cost of about 166.7 litres of diesel (new price RM3.35 -old price RM2.15 = RM1.20), which will cover travel of about 2500km assuming each litre allows travel of 15km.
Are Our Prices Going to Rise?
In theory, there should not be a significant or sharp rise in the price of consumer goods or transportation services as logistic operators continue to enjoy the same diesel prices as before, albeit using fleet cards and not under a blanket subsidy.
However, there have been reports of irresponsible Malaysian companies (who have already been issued with subsidy fleet cards) increasing the prices of their services despite being eligible for subsidised diesel, and action has been taken on them.
Final Thoughts
The presence of blanket subsidies, especially for our fuels, have resulted in the abuse of the benefit, especially by illegal smugglers and users. This abuse has caused Malaysia to lose billions if Ringgit, bleeding our funds that could otherwise be used to benefit the country and its citizens, such as being channeled to development, education and healthcare.
Malaysians can continue to enjoy subsidised diesel, with a special application & approval from the government. Therefore, we hope that you'll contact the relevant departments to ensure you can enjoy special diesel prices as Malaysians.
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