KUALA LUMPUR: The shift from bulk RON95 petrol subsidies to targeted subsidies through BUDI MADANI (BUDI95) is expected to reduce subsidy leakage and generate fiscal savings of around RM2.5 billion to RM4 billion per year, the Finance Ministry said.
It said this was subject to movements in world crude oil prices and currency exchange rates.
“These savings are not the result of reduced protection for the people, but rather the result of more accurate targeting of subsidies to eligible groups,” it explained in a reply posted on the parliament website to a question from Datuk Seri Ismail Sabri Yaakob (BN-Bera) regarding the amount of subsidy for RON95 petrol after the rationalisation was implemented at the end of September and how much savings there will be from the rationalisation of the petrol.
The ministry added that in terms of determining the price of RON95 petrol, the retail price of RON95 is still determined based on the automatic pricing mechanism (APM), which takes into account world crude oil prices, refining costs, distribution costs and currency exchange rates.
In the context of subsidy rationalisation, the implementation of BUDI95 does not change the APM mechanism but rather improves the method of distributing subsidies resulting from the mechanism.
This approach allows the government to control the growth of subsidy expenditure more effectively, especially in a situation where world crude oil prices are rising again, it said. – BERNAMA
