20th July 2022 - 2 min read
Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz has shared that the mechanism for targeted petrol subsidy is already in the early stages of testing. Additionally, it will take another three to six months of study before it is ready for implementation.
“The (early) testing will be followed by more extensive evaluation in terms of other methods, as well as determining the feasibility of such a mechanism not only in urban areas, but also rural ones. The development and testing of a targeted subsidy system is expected to take a period of between three and six months before it is ready for implementation nationwide,” Tengku Zafrul stated, adding the the study is important in the government’s efforts to find ways to do away with blanket subsidies.
The minister also explained that the government will implement the new mechanism in phases instead of abruptly in a single move. This is to prevent sudden inflation, or an unwanted consequence on the momentum of the nation’s economic growth.
Additionally, the government may also adopt a similar approach used in tackling the issue of chicken prices to reduce market distortions, said Tengku Zafrul. For context, the government had bumped the ceiling price of chicken up by 50 sen per kg, but also provided additional cash aid to the B40 group to help them cope with the increasing cost of living.
“In line with this approach, the government will not increase the price of petrol to reflect the market price without subsidies given its impact on inflation, even though the RON95 price of RM2.05 per litre is approximately 50% that of the real price without the subsidies. Thus, the government’s strategy is to ensure the replacement of bulk subsidies with a combination of targeted subsidies and cash assistance in stages,” Tengku Zafrul stated.
The government has been consistently highlighting its intention to switch from the current blanket fuel subsidy to targeted subsidy over the past few months, in a bid to curb leakages and to streamline the provision of the benefit only to those who are truly in need. This includes comments from the International Trade and Industry Minister, Datuk Seri Mohamed Azmin Ali and Minister in the Prime Minister’s Department (Economic Affairs), Datuk Seri Mustapa Mohamed.
(Source: Malay Mail)
Subscribe to our exclusive weekly newsletter and we’ll bring you the week’s highlights of financial news, expert tips, guides, and the latest credit card and e-wallet deals.
Stay tuned for what’s to come next in the personal finance world