Treasury Sec-Gen: Govt Considering Lower Electricity Subsidy For High-Income Households In 2H23
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(Image: The Edge Markets)

The Ministry of Finance (MOF) is considering providing lower electricity subsidy for high-income households in the second half of 2023 (2H23), said Treasury secretary-general Datuk Johan Mahmood Merican. This is as the government continues to carry out its subsidy rationalisation plan.

“Perhaps in the second half of the year, we would certainly moot, for example, high-income households not to be subsidised as much, probably we have to sequence it (the subsidies),” said Datuk Johan during a post-budget forum, adding that this is in line with the government’s expectation for high-income earners to also contribute to the poor, instead of relying solely on the government to do so.

Additionally, Datuk Johan revealed some key data from MOF to justify why the government is considering such a step, noting that domestic electricity subsidy amounted to RM4.9 billion just for the first quarter of 2023 (1Q23) – well above the RM2.3 billion spent during the second quarter of 2022 (2Q22).

(Image: Malay Mail/Yusof Mat Isa)

Of the RM4.9 billion electric subsidy expense recorded, 13.1% (equivalent to RM1.95 billion) was used by households that consumed more than 600 kilowatt hour (kWh). In comparison, households that used between 300 kWh to 600 kWh received 12.7% (RM1.89 billion) of the subsidy, whereas those who consumed less than 300 kWh took up 7.1% (RM1.06 billion).

The table below further summarises other data points that were also shared by Datuk Johan:

Domestic consumers (electricity)Power consumption1Q23 subsidy amountAverage electricity bill per month
Domestic AHouseholds that consume <300kWhRM1.06 billionRM77
Domestic BHouseholds that consume between 300kWh to 600kWhRM1.89 billionRM77 to RM220
Domestic CHouseholds that consume >600kWhRM1.95 billionMore than RM230

“The group that are billed RM230 and above, they are only about 900,000 of the domestic users, but you notice that they consumed almost RM2 billion of the subsidy. Meanwhile, the vast majority of our population, under Domestic A, numbers about 4.6 million people, but they have less than half of the subsidy,” Datuk Johan pointed out, noting that this is why the government feels the necessity to reduce electricity subsidy for the rich.

Similarly, Datuk Johan noted a similar trend for electricity subsidy meant for companies as well. He said that electricity subsidy for companies in 1Q23 is expected to come up to RM10 billion, with around 100,000 big companies taking up over RM6.5 billion, while approximately 1.6 million small and medium enterprises (SMEs) consuming about RM3.5 billion.

“The big companies and the top domestic users…so 10% of the population consumes 50% of the electricity subsidy. And a very similar matrix applies for petrol (subsidies),” Datuk Johan commented. That said, the government has already begun to implement a targeted electricity subsidy mechanic for non-domestic consumers, where medium and high-voltage (MV and HV) non-domestic users are currently required to pay a surcharge of 20 sen/kWh. Meanwhile, farmers and animal breeders, as well as lower voltage (LV) non-domestic users – such as micro businesses and small and medium enterprises (SMEs and MSMEs) – will be charged the existing 3.7 sen/kWh surcharge.

Datuk Johan further shared that the government has set aside RM6.8 billion for electricity subsidy in the re-tabled Budget 2023, but the total expenditure for electricity subsidy in 2022 came up to RM9.8 billion. As such, he stressed that certain steps must be taken to ensure that the government can keep to its budget allocation for electricity subsidy.

(Source: The Edge Markets)

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