Fine-tune targeted fuel subsidy mechanism to benefit needy

KUALA LUMPUR: The targeted fuel subsidy for the bottom 40 percent of households (B40), announced during the tabling of Budget 2019, was well received by the people.

Many are hoping the initiative will reach the targeted groups and help alleviate their financial burden in view of the rising cost of living.

To ensure its smooth implementation and original objectives are met, the government has urged interested parties to submit their views and suggestions in order to find the most appropriate mechanism to implement the new subsidy.

Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail was quoted by the media as saying that the rakyat should stop criticising the proposed subsidy and instead come up with constructive criticism on the subsidy implementation.

When tabling Budget 2019 in the Dewan Rakyat on Nov 2, Finance Minister Lim Guan Eng announced that owners of vehicles with engine capacity of 1,500cc and motorcycles of 125cc would be given a petrol subsidy.

Under the system, the government will give a RON95 petrol subsidy of 30 cents per litre for cars (limited to 100 litres a month) and motorcycles (limited to 40 litres a month).

Set to kick off in the second half of 2019 with an allocation of RM2 billion, the initiative is expected to benefit four million vehicle owners and 2.6 million motorcycle owners.

Nurhanis Mohd Roslan, 31, who works as a clerk for a private company, suggested that petrol subsidy cards be issued to the targeted groups, saying that the government could initiate an online application process before issuing the cards to those who qualify.

“It can be done online by giving our personal details, including household income and details of our vehicles. From there the government can ascertain who is eligible for the subsidy card.

“We should be allowed to use the card at any petrol station and not limited to certain stations only. This will need collaboration between the government and petrol station operators so that the deserving groups will benefit from it,” she told Bernama.

Engineer Muhammad Afiq Mahadi, 32, agreed with the petrol subsidy card suggestion, saying that people, however, have to be honest when providing their personal, as well as vehicle, details.

“The government may ask for proof of ownership of the vehicle to determine whether the person is eligible for the fuel subsidy. Petrol station operators should also make sure that the car details given on the petrol subsidy card match the car driven by the cardholder.

“It (all that checking) seems tedious but it has to be done to ensure that the petrol subsidy is not abused,” he said.

Acknowledging that the mechanism was not easy to implement, public relations officer Mohd Fadly Daud, 39, said the government would have to act firmly and carry out continuous monitoring to prevent irresponsible parties from exploiting any deficiency in the system.

“Although it’s pretty complicated, it is not something impossible (to implement the petrol subsidy smoothly). I think the government should give vouchers to the deserving people based on their EPF (Employees Provident Fund) records or other related records.

“I also feel that the targeted petrol subsidy should not apply to individuals who don’t work, except for senior citizens and people with disabilities. This may seem unfair to those who don’t have a permanent income but if it is fine-tuned, it can help the government to implement this mechanism smoothly,” said Mohd Fadly, who also volunteers for various charity-based projects.

Pointing out that working people in the middle 40 percent (M40) households (earning between RM3,860 and RM8,319), who were also taxpayers, deserve to be helped by the government, Mohd Fadly said: “It’s not a matter of being calculative. The definition of low-income has to be refined further. Why is a person stuck in the lowincome bracket? Is it because he lacks the motivation to improve himself or is he solely depending on (government) assistance?”

He said non-working people who depended on government help and subsidies were not being fair to those who work hard and paid their taxes.

“It’s not fair to the M40 group because, in terms of percentage, they make up the biggest component of taxpayers but don’t get government subsidies,” he added.

Universiti Utara Malaysia (UUM) senior lecturer Muhammad Ridhuan Bos Abdullah said although the proposed petrol subsidy was expected to fulfil the needs of the targeted groups concerned, the government should make sure that it was comprehensive and benefited those living in interior areas and in Sabah and Sarawak.

Due to the different location and geographical factors in the peninsula and in Sabah and Sarawak, the latter two states’ main mode of transportation must also be taken into consideration.

“It may not be a problem in Peninsular Malaysia. But in Sabah and Sarawak there may be some technical issues as the targeted groups live in the interior and they use mainly boats fitted with engines (as their mode of transportation),” said Muhammad Ridhuan Bos, who is attached to UUM’s Centre for Economic, Finance and Banking Studies.

He said many have proposed that a card be introduced for the purpose of implementing the fuel subsidy system but the important thing was to ensure that it went to the targeted groups.

Suggesting that the new mechanism be implemented in stages, he said the government should work together with specific petrol stations (selected by the government) to facilitate monitoring and prevent the subsidy card from being abused.

Meanwhile, Petrol Dealers Association of Malaysia (PDAM) president Datuk Khairul Annuar Abdul Aziz said the proposed fuel subsidy mechanism can be implemented in two ways.

“First, those eligible (for the subsidy) can pay first and then get a refund from the government. Second, by using a petrol subsidy card that entitles them to the 30 cents per litre subsidy. In this case, the government will have to give us the (subsidy) money earlier, otherwise our working capital will be disrupted,” he said.

He also hoped that the implementation of the subsidy would not lead to higher operating costs for the petrol pump operators.

“What is important to us is that we don’t want any cost increase, like having to hire additional staff. We also don’t want to use our working capital.

“In fact, many dealers have been insisting that our commissions be reviewed first before any new system is implemented as we are worried that additional costs will drive many low-volume dealers to close shop,” he said.

On the proposal to float the price of RON95 petrol based on the Automatic Price Mechanism (APM), as was stated in Budget 2019, Khairul Annuar said floating was a better option as it would make petrol prices more stable, compared with determining the price on a weekly or monthly basis.

“Our costs are high while our margins are low, so if there’s any price rise, it will affect us greatly. Unlike other industries, our (petrol) prices are determined by the government and not by us.”

The Domestic and Consumer Affairs Ministry will carry out a pilot test before implementing the targeted petrol subsidy. This is to ensure the smooth implementation of the mechanism targeted at the B40 group at all petrol stations.

The subsidy system is expected to be implemented as early as April next year.

The ministry has also prepared a request for proposal (RFP) for service providers to formulate a new system before the pilot project is carried out in the first quarter of next year.

If the targeted fuel subsidy initiative yields a positive impact, the same mechanism may be considered for other goods to help the low-income group. - Bernama