The rationalisation of diesel fuel subsidy in Peninsular Malaysia that has taken effect today is a burden on Malaysians, said former prime minister and Perikatan Nasional chairman Tan Sri Muhyiddin Yassin in a statement.

The increase in the retail price of diesel fuel by 56%, or RM1.20 to RM3.35 per litre “is very high”, and does not take into account the burden already shouldered by the people through inflation and the high cost of living, said Muhyiddin in his statement.

“The sudden increase will also cause an economic shock and result in a multiplier effect on other economic and social sectors. The cost to the people may be much bigger compared to the RM4bil saved by the government through the rationalisation,” he said, asking if the added cost to the people is worth it.

The Perikatan Nasional chairman also expressed doubt regarding the subsidised diesel control system 2.0 (SKDS 2.0) in its ability to prevent price increases along the supply chain, as SKDS 2.0 only applied to selected types of commercial vehicles.

Strict conditions applied to the Budi Madani targeted subsidy scheme could also see a large number of consumers become ineligible to receive the subsidised diesel, including farmers and small agricultural players who use diesel-powered vehicles to generate local produce, Muhyiddin continued.

For those who qualify and receive the subsidy, the RM200 aid is certainly not sufficient to cover the increased price of diesel, he added.

The decision to rationalise diesel fuel subsidy in Malaysia was due to the cost to the government which had increased by 10 times in just five years, finance minister II Datuk Seri Amir Hamzah Azizan said at the end of last month. Budi Madani was opened for applications on May 28. Today, the finance ministry named the types of diesel vehicles that are not eligible for the Budi Individual targeted subsidy.

The new retail price of the fuel is based on the automatic pricing mechanism (APM) formula for the month of May. Finance minister II added that under the targeted diesel subsidy implementation, the government has set diesel fuel prices for eligible sectors as follows:

• Subsidised Diesel Control System (SKDS) 2.0, which provides fleet cards to eligible logistics vehicles to mitigate the impact of the diesel price on consumer goods prices, is set at RM2.15 per litre.
• Subsidised Diesel Control System (SKDS) 1.0 for land public transport, including school buses, express buses, ambulances and fire engines remains at RM1.88 per litre.
• Subsidised diesel for fishermen is maintained at RM1.65 per litre.

At the above rate, the RM200 aid will cover the first 167 litres of diesel. If you use any more than that per month, your fuel spend goes up. For a typical diesel pick-up truck that does around 10 km/l, that works out to an average mileage of 1,670 km per month before the ‘subsidy’ runs out.

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