Hard to argue when you put it this way, right? “Those with a BMW cannot receive the same subsidies as those with Kancil,” said international trade and industry minister Datuk Seri Mohamed Azmin Ali over the weekend, as he pushed for a targeted fuel subsidy system.
The MITI minister said that a fuel subsidy scheme where the rich will pay more compared to lower income groups is being considered by his ministry, and that they had discussed ways to ease the impact of rising global crude oil prices, particularly on the lower income group, The Star reported.
Azmin said they talked about the review in recent special retreat. He added that the government is still seeking a suitable restructuring mechanism for fuel subsidy, and that it’s necessary due to a drastic increase in the projected fuel subsidy bill from RM11 billion last year to RM28 billion in 2022.
Azmin’s remarks echo previous statements by his cabinet colleagues such as finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz and minister in the PM’s department (economy) Datuk Seri Mustapa Mohamed. It’s very clear now that the government is looking at targeted fuel subsidy to replace the current blanket subsidy, as keeping RON 95 at RM2.05 per litre for everyone is unsustainable at current crude prices.
Last week, Zafrul said that Malaysia’s rich are enjoying the bulk of government subsidies. He explained that the T20 group, the top 20% earners, benefitted from more than half of the RM4 billion the government has spent on petroleum subsidies this year, till March, due to the blanket subsidy method.
“For every RM1 of fuel subsidy, 53 cents go to the T20, while 15 cents benefit the B40. So, for example if the subsidy bill this year is expected to top RM30 billion, over RM15 billion is subsidy to the T20,” the former banker turned senator said, adding that the government is revising the mechanism for electricity and petrol subsidies for it to be more targeted and focused on the needy.
“Those who can afford should pay more and the people who do not deserve (the subsidy) should not be given the subsidy at all. Subsidies are meant for the poor people, particularly the B40 (bottom 40% income group). The issue is the timing of when it is going to be implemented,” Mustapa said last month.
So, it’s clear then that targeted fuel subsidy is the (very near) future for Malaysia, but the big question of how the government is going to implement it remains. We’re pretty sure that giving fuel subsidy based on car brands or types won’t be it, and Azmin was just using BMW/Kancil to illustrate rich/poor. Also, car engine capacity has the loophole of downsized turbo engines.
How about using the bantuan (BR1M, BPR, BKM, whatever future B) database to determine who deserves subsidy? Sounds good, if the list is fair and correct in the first place.
Just raise it to market price and then give direct cash transfers to worthy recipients to offset? Trusting people to use the cash as intended aside, we’ll have to go back to the bantuan database to determine who gets the payout. Personally, I have doubts on how fair and bulletproof the data is, but that could be just me. Also, is the bantuan net wide enough to catch everyone who needs help?
Then, there’s the often-neglected urban M40 class – while not officially poor, rising living costs hit them hard (perhaps harder than most) and there’s almost never any bantuan to help cushion anything, as the focus is always on assisting the B40.
What’s certain is that coming up with a mechanism for targeted subsidy, and determining who gets it and who doesn’t, is no easy task. Poking holes is much easier than coming up with solutions, as I have just demonstrated above. Any ideas from your end? Also, check out the Pakatan Harapan-era petrol subsidy programme proposal for the B40/M40 and see if it’s workable.