Fuel and gas subsidy

I have nothing much to add. This came from Dr Chua Soi Lek’s blog here.

In Malaysia, the government spends a huge amount of money to subsidize a lot of services in the country. Subsidy for fuel and gas is estimated to be about RM35 nillion, healthcare services and educational sector would easily swallow another RM25 billion. This subsidy is given to everyone irrespective of his financial status.

Often, the rakyat is unaware of the element of subsidy by the government in daily life and the present mode in delivering subsidy is not equitable, benefiting the rich more than the poor. Who should rightly receive a bigger portion of the subsidy? The government should reveal how we ditch out the subsidy. A rich man who drives a Mercedes pays the same amount for petrol as a poor man using his motorbike; he pays the same electricity tariff as the one living in a low cost house. In the same way, the rich have access to medical healthcare just as the poor.

When the government abolishes examination fees for public exams, to the rich, its a pittance, but to the poor, it may be significant. The time has come for the government to give money directly to the poor and let the market forces determine the real value, especially for fuel and gas. The next question is what is regarded as the level which entitles them to directly receive money from the government. The poverty rate used by EPU of course is outdated. The EPU needs to study at what level a family receives a direct grant from government, annually or twice a year.

Assuming that there are 28 million people in Malaysia and a household of 4.5 members per family, we are talking about 6.2 million households. Assuming a rough figure of 25 percent people are entitled to aids, we are talking about 1.6million people that are entitled to receive grants from the government of RM10,000. With that, we are only talking about RM16 billion. In the case of fuel where the subsidy is about RM35 billion, theres a cost saving of RM19 billion and the poor is more appreciative what the government is doing for them in the time of rising prices and inflation. Poor households who will not burn that RM10,000 on petrol and electricity tariff, this amount becomes more meaningful to them. I will only talk about healthcare financing scheme at some other time. There is still a lot of justification to re-look on how government disburses the subsidy. I acknowledge that these assumptions are simplistic at best. Feel free with helpful suggestions and ideas.

Go to his blog here to leave your comments and suggestions.

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It’s a good way of thinking, but very very difficult to put into action, is all that I can say.

There was one particular comment on his blog though, that I want to share here:

Funniman1965 said…
I actually came back from a fishing trip 2 weeks ago and the tekong told me that his fisherman neighbour in Sabak Bernam area sell diesel to foreigners for RM 0.18 per litre.
Almost every week, they would make shipments using modified fishermen boat. Profits ran in thousands.

He told me that they buy at a subsidised rate for RM 0.10 per litre. How they get the diesel supply regulary is anybody’s guess.

This subsidy is open to abuse. The real intended benefitiary often do not get them.

____

This seems in line with what I wrote here. It’s no mere rumour. Definitely smells of “fish”.

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UPDATE:

Diesel subsidy scheme in 6wks, petrol next

JOHOR BARU: Restructuring the petrol subsidy scheme will be the next agenda after the government decides on the new diesel subsidy scheme in six weeks’ time.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said that all parties had been asked to submit proposals on how to manage and control the fuel subsidy scheme.

“I hope that we can chose the most practical, economical and effective proposal within the next six weeks,” he said adding that his ministry had already been looking into various suggestions.

The ministry had decided to begin with restructuring diesel subsidies as these involved a smaller group of consumers. “If the scheme is successful, we can also apply it for petrol,” Shahrir said at a press conference after officiating the Young Malaysians Movement (YMM) annual general meeting here on Sunday.

Original article here.

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So in 6 weeks time, we’ll be able to hear from the government itself whether they intend to lower their subsidy, which would equal to higher fuel prices. If that happens, no doubt there would be noise in the public. And it would put them in a seriously problematic position, especially since Anwar has promised that if the Pakatan Rakyat becomes the Federal Government, fuel prices will come down.

But less subsidy from the government means less wastage of money. Besides, we need something to encourage us to use the public transport system a bit more.



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