KUCHING: Billions can be saved by plugging fuel subsidy leakages under BUDI95, though the scheme will barely move Malaysia’s inflation rate, said Datuk Madeline Berma.
The Institut Masa Depan Malaysia senior fellow said RON95 accounts for about 5.5 per cent of the CPI basket.
“A study by OCBC Global Markets Research revealed that the subsidised price of RON95 petrol at RM1.99 per litre under the BUDI95 programme will reduce annual CPI by 0.1 percentage point, which is quite negligible,” she told Sarawak Tribune.
She noted that the lower fuel cost will reduce household spending on petrol and increase disposable income, helping to ease the cost of living.
At the same time, she said the main savings from BUDI95 are expected to come from reducing leakage.
“The bulk of savings from this targeted fuel subsidy is expected to come from reducing smuggling activities, foreign nationals and large corporations,” she said.
On the 300-litre monthly cap, Madeline said it would not affect all groups equally.
“ (Many) Sarawakians and Sabahans, and the Orang Asli in Peninsular Malaysia live in remote areas and travel long distances. As such the monthly 300-litre quota is insufficient,” she said.
She also pointed out that non-citizens and large corporations are not eligible for the subsidy, which is reserved for Malaysians with personal driving licences.
Looking ahead, she described the scheme as only a short-term measure.
“In the long term it is not sustainable, given that global oil prices are volatile,” she said.
She said that the targeted subsidy is expected to help the government save between RM2.5 billion and RM4 billion annually, with Brent crude recently trading at around US$66 per barrel.
“The subsidised rate of RM1.99 is artificially low and will create problems if crude prices rise.
“Any future increase in crude prices will widen the gap between market and subsidised prices, meaning that the government will need to spend more on subsidies,” she said.
