29th July 2022 - 3 min read
Deputy secretary general of Treasury (Policy) for the Ministry of Finance (MOF), Datuk Johan Mahmood Merican has revealed that the government is currently pilot testing a targeted fuel subsidy mechanism that is tied to the use of e-wallets.
“So we’ve actually started pilot tests with the oil stations using e-wallet platforms, so as what my minister [Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz] may have mentioned in the Parliament, we’re at another three to six months of testing before we’re ready to go live because it’s something that we do not see lightly,” said Datuk Johan Mahmood in an interview with radio station BFM, although he did not share further details as to how the mechanism will work. He also noted that the MOF will continue to study other potential methods.
The deputy secretary general further stressed that the test is crucial to ensure that the mechanism will not create problems for the rakyat when it is implemented on a nationwide level. “While we in the urban areas may be very used to using e-wallets, it may not be as easy for those in rural areas or for elderly individuals, so we need to ensure that it’s really something that’s easy to use,” he said.
Additionally, Datuk Johan Mahmood highlighted that one of the key challenges faced by MOF in its search for the right targeted fuel subsidy mechanism is finding a suitable transferable system.
“It’s almost like trying to replicate what we experienced for our Tenaga [electricity] bills where if you consume less, you pay a lower rate, and if you consume more, you pay a higher rate. The challenge on implementation is that whereas a Tenaga bill is one metre per home, you and I can go to any petrol stations to buy our fuel, so we need a system that is almost transferable, enabling the targeted groups to access subsidised fuel irrespective of which station they go to,” Datuk Johan Mahmood explained.
Aside from that, Datuk Johan Mahmood also shed some light as to why MOF is reluctant to adopt a system where it provides the subsidy to eligible individuals via cash transfers after they have paid for the unsubsidised fuel price. “What we’ve learnt from the past is that if you just increase prices, and try to do a cash transfer, that has its limitations in terms of the effectiveness of helping the family because some B40 consume more fuel than others, and so it may not necessarily be equitable,” he remarked.
The targeted fuel subsidy mechanism has emerged as a frequent topic of discussion recently as Malaysia’s subsidy cost is set to exceed its original allocation of RM31 billion by more than RM40 billion. As such, Finance Minister Tengku Zafrul has reiterated that the current mechanism – which provides blanket subsidies to all Malaysians regardless of income background – is unsustainable. He also noted that the government is also looking to review the effectiveness of each subsidy programme so that the savings can be channelled to those who are truly in need.
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