RM4 bln estimated savings from diesel subsidy to free up govt fiscal space

Finance Minister II Datuk Seri Amir Hamzah Azizan said that in 2022, RM81 billion was spent for subsidies and social welfare support, and the amount fell to less than RM70 billion last year.

"Therefore, if we allocated RM307 billion in the budget for operating expenditure, there would be less room to spend on more important matters for the future.

"The implementation of targeted diesel subsidy is to ensure a larger fiscal space," he said during an information session with senior editors at the Finance Ministry recently.

Improve quality of services, looking after people's welfare

Amir Hamzah said the savings could then be spent in managing the country, especially to improve services that the people require, including infrastructure such as roads and schools as well as health sector services such as clinics and medicines.

"What we gain (from the savings) will be used to raise the (quality of) services for the people. If we do not implement (the targeted diesel subsidy), we will not have the savings and it would be difficult for the government to improve services in the country," he added.

Amir Hamzah said the targeted diesel subsidy will also be implemented using the best mechanism and emphasise the target groups that require assistance.

"We provide (subsidies) in the appropriate sectors, and the savings (we get) will be ploughed back into infrastructure, schools and whichever services that the government should implement. This is part of the (continuous) efforts by the government," he added.

Subsidy distribution via BUDI MADANI

Explaining the targeted channelling of the subsidy called "Budi MADANI", he said this includes five areas -- public transport, fishermen, selected commercial vehicles under the Subsidised Diesel Control System (SKDS 2.0), individuals and farmers including smallholders.

BUDI MADANI will benefit 700,000 diesel vehicle owners in total, covering about half of active diesel vehicles in Peninsular Malaysia.

Of the 700,000 BUDI MADANI recipients, 300,000 of the diesel vehicles are privately owned, and the rest are commercial vehicles.

Since 2013, the Domestic Trade and Cost of Living Ministry (KPDN), has led the governance-related implementation at a special price rate different from petrol stations' retail pricing. This implementation uses the SKDS 1.0 with fleet cards issued by oil companies involving 10 types of public transport vehicles.

Effective March 7, 2024, the implementation of this system was expanded via SKDS 2.0 Phase 1 covering an additional nine types of goods transport vehicles. This was expanded to SKDS 2.0 Phase II involving an additional 14 other types of goods vehicles.

Last Monday (May 27), the Finance Ministry said the implementation of the MADANI, or BUDI MADANI Subsidy Assistance Programme, involves private diesel vehicle owners for individuals, small farmers and small commodity farmers.

The BUDI MADANI programme complements existing government efforts to target diesel subsidies via the MySubsidy Diesel system operated by KPDN; SKDS is a programme under MySubsidy Diesel.

Under BUDI MADANI, cash assistance of RM200 per month is given to private diesel vehicle owners for individuals, small farmers and commodity smallholders.

Amir Hamzah added that according to a study by the Statistics Department Malaysia, this monthly assistance is expected to be sufficient to cover the rise in diesel prices based on vehicles travelling up to 60 kilometres daily, thus, meeting the needs of most individual diesel vehicle owners.

He said recipients of subsidised diesel such as the logistics sector, hawkers and small traders should consider the government subsidy as a trade-off to not raise the price of goods or services.

"The government, together with KPDN, will continue to intensify operations to curb profiteering," said Amir Hamzah.

-- BERNAMA