Experts’ conflicting views on fuel subsidy method

Ahirul Ahirudin
Written by Ahirul Ahirudin

KUALA LUMPUR – August 7, 2018: Economists and automotive experts apparently do not share the same view on the possible government’s cash handout method to subsidise fuel.

It was reported by a prominent automotive news portal PaulTan.org that the government may ditch the original plan to introduce targeted fuel subsidy based on engine displacement and replace it with a more traditional method of cash handout.

It has also been reported that when the targeted fuel subsidy comes into effect, the ceiling price on RON95 petrol may be lifted. Currently, its ceiling price is capped at RM 2.08 per litre.

Associate Professor Dr Ahmed Razman Abdul Latiff of Putra Business School said the lower and middle income groups would be affected should the government really lifts the ceiling price,.

“Once the ceiling price is lifted, the fuel price will be subjected to market demand. If the price keeps increasing, this will affect the cost of certain products and services, which will definitely have an impact on lower and middle income households,” he said.

Ahmed Razman also believes that distributing cash directly to lower income households will not help them in managing the cost of transportation as it can easily be abused for other purposes.

“Unless the cash distribution is in the form of vouchers which can only be redeemed at the petrol stations with IC (identity card) number printed on the voucher as the confirmation for it to be redeemed, it can easily be abused,” he said.

However, another economist, Professor Dr Faridah Hassan of Universiti Teknologi Mara said cash handout can benefit those from the lower income group, and not easily abused since the government have access to an improved database of people’s income.

“The government has income and vehicle ownership data extracted from BSH (Bantuan Sara Hidup programme) and Road Transport Department (JPJ), thus abuse is slightly difficult unless there are ‘invisible hands’ at work,” she said.

Faridah also of the view that giving cash directly to the lower income families could benefit them more instead of subsidising motorists based on the engine capacity of their vehicles.

Meanwhile, auto analyst Hezeri Shamsuri told The Mole that he and the automotive portal Careta, which he founded were not at all in favor of the government providing fuel subsidy for private vehicle owners.

“Careta’s stand is that the country should not be subsidising fuel to the masses. It should instead subsidise fuel for public transport like buses and trucks to help promote public transportation and lower the costs of goods.

“We believe that there is zero benefit in subsidying fuel for the masses. Government should find ways on how people can travel in a more efficient way instead,” said Hezeri.



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Ahirul Ahirudin

Ahirul Ahirudin