KUCHING: Claims that the federal government is being unfair by continuing blanket diesel subsidies in Sabah, Sarawak and the Federal Territory of Labuan are inaccurate, says Domestic Trade and Cost of Living Minister Datuk Armizan Ali.
He clarified that the government has never taken the position that targeted diesel subsidies would not be introduced in the three regions, but instead would be implemented gradually.
“The government’s policy from the outset has been to reform subsidy distribution through targeted mechanisms. This means subsidies will continue, but with a more focused delivery approach,” he said in a statement posted on his Facebook.
Armizan explained that given the scale of the reform, its implementation must be carefully designed and rolled out in stages.
He noted that in 2024, the government began targeted diesel subsidies in Peninsular Malaysia, followed by the nationwide rollout of targeted RON95 petrol subsidies in 2025, both of which have been implemented smoothly and continue to be refined.
“This year, the federal government, particularly the Ministry of Finance, is studying a proposed framework for implementing targeted diesel subsidies in Sabah, Sarawak and Labuan. Once finalised, the mechanism will be discussed with the Sabah and Sarawak state governments before implementation,” he added.
He stressed that diesel subsidies will remain in place but will be better targeted to address leakages, including misuse and smuggling.
According to him, existing mechanisms such as BUDI95, BUDI MADANI, the Subsidised Diesel Control System (SKDS) and the Subsidised Petrol Control Scheme (SKPS) will serve as references in determining the most suitable model for the three regions, taking into account their unique conditions and stakeholder feedback.
At the same time, Armizan said it is important to correct the perception that diesel subsidies are no longer provided in Peninsular Malaysia.
“Subsidies are still being channelled in a targeted manner through SKDS and BUDI MADANI to sectors such as land public transport and goods distribution, as well as to certain segments of the population,” he said.
He explained that the phased approach for Sabah, Sarawak and Labuan is due to several factors, including the high dependence on diesel, geographical challenges, and the significant price gap for essential goods compared to Peninsular Malaysia.
He added that higher logistics costs, particularly sea freight from Peninsular Malaysia to Sabah and Sarawak contribute to the price disparity, as transport costs are higher than those in many major regional trade routes, including China and India, leading to greater reliance on imports and increased cost of living.
