25th May 2022 - 3 min read
The Federation of Malaysian Consumers Associations (FOMCA) has cautioned that the government’s plan to remove the current blanket fuel subsidy may backfire and increase inflation within the country. This is especially as Malaysians are faced with a rising cost of living.
The chief executive officer of FOMCA, T. Saravanan explained that the government’s plan – while well-intentioned – may fail because suppliers and traders are very attuned to fuel prices, and will raise the prices of goods whenever it increases. This is regardless of whether they are affected by the subsidy removal.
“Even if they also enjoyed the subsidy, their [the traders’ and suppliers’] excuse would be that everything else has gone up, and they too have to hike their prices. In times of such severe inflation, this is likely to backfire,” said Saravanan, adding that consumers – especially those in the M40 and B40 groups – are already being overwhelmed by challenging living conditions, such as an uncertain economy, declining purchasing power, and currency fluctuations.
That said, Saravanan concedes that a targeted subsidy system can be a good move, provided that it is transparent and not abused. “Many countries have implemented a targeted subsidy system, and it is about time Malaysia does the same, but the implementation requires transparency on the part of consumers and suppliers,” he said.
Among other things, Saravanan stressed that there must be a clear system to identify consumer groupswho can benefit from the subsidy, and that the implementation of the system must be careful and fair. “The other thing that will be a big issue is the paperwork and bureaucracy when it comes to claiming the subsidy. I hope the government will reduce the red tape and don’t give people the runaround,” he further said.
Additionally, Saravanan commented that the government will also need to look out for the middle-income group during the implementation of the targeted subsidy as some of them may lose out on the perk. Supplementary measures should be carried out to ensure that their purchasing power does not lessen, he said, especially since many middle-income households are now also experiencing financial difficulties that afflict low-income families.
Earlier this week, the International Trade and Industry (MITI) minister, Datuk Seri Mohamed Azmin Ali had reiterated that the government is planning to switch over from the current blanket fuel subsidy to a targeted fuel subsidy. Other ministers who have also highlighted the matter include Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz and Minister in the Prime Minister’s Department (Economic Affairs), Datuk Seri Mustapa Mohamed.
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