Blanket diesel subsidy gives rise to leakages, smuggling - DPM Zahid

He said as such, it is not appropriate for the government to continue with the current method of granting subsidies as it is unfair to the target group comprising people who really need assistance.

"The benefits of the blanket subsidies given all this while are also enjoyed by the high-income group and non-citizens.

"The diesel subsidy which should benefit fishermen or allow consumers to get 'value for money' for the services and goods they consume has been abused by certain quarters who are taking advantage of the situation," said Ahmad Zahid, who is also the Rural and Regional Development Minister.

Ahmad Zahid said this in his speech at the opening of the Symposium on Cost of Living (SCOL) 2023 here today, which was delivered by Acting Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali.

He said the Impact Study Report on Petrol and Diesel Subsidy Programme for Selected Transport Sectors showed that the T20 group on average used RM399 worth of RON95 petrol a month while the B40 group used an average of RM243 per month.

"These findings prove that the blanket subsidy method has not achieved the basic objective because the target group which should be helped is not getting the optimum benefits," he said.

According to him, the government spent a total of RM91.9 billion on subsidies in 2022, which is a huge sum compared to the amounts in previous years.

For this year, he said the original allocation for subsidies was RM64 billion but the government projected the figure to hit RM80.9 billion based on current expenditures.

"A continuation of this scenario is not optimum from the fiscal angle, and it is appropriate for the government to improve the aid delivery method to make it more targeted for the people," he added.

Ahmad Zahid said the provision of targeted subsidies was challenging and the government needed to be careful in implementing it because it would have effects on various groups of society and economic sectors.

Before implementing targeted subsidies, the government also needed to study the expected direct impact on the inflation rate through the consumer price index, he said.

Ahmad Zahid said the agenda on social protection guarantees should be opened the widest possible and existing methods like waqaf, endowment and social enterprise should be promoted to complement subsidy rationalisation.

"If we have social protection guarantees and retargeting of subsidies and parties like waqaf and baitulmal play their role, I believe we can put a stop to EPF withdrawals by contributors due to extraordinary emergencies," he said.

More than 600 people are participating in the two-day SCOL 2023, which is organised by the National Action Council on Cost of Living (NACCOL) and the Domestic Trade and Cost of Living Ministry.