KUCHING: The rollout of targeted diesel subsidies in Sarawak, Sabah and Labuan will be implemented in phases, taking into account the regions’ unique geography and heavy reliance on diesel for logistics.
Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali said the mechanism for East Malaysia is still being refined, but stressed that curbing leakages from misappropriation and cross-border smuggling remains the key objective.
At present, diesel is priced at RM2.15 per litre in Sarawak and Sabah, significantly lower than RM5.52 per litre in Peninsular Malaysia — a disparity that has raised concerns over the sustainability of the subsidy system.
From an industry perspective, Johor Transport & Logistics Operators’ Association (JoTran) president Frankie Chia Jee Onn told Sarawak Tribune that the widening price gap has fuelled increasingly aggressive smuggling activities, driven by the high cost of non-subsidised industrial fuel.
“This issue is at a worrying level as it creates an unbalanced business environment,” he said, adding that compliant operators are facing unfair competition.
According to Chia, black market operators are able to undercut freight rates as their fuel costs fall outside regulated pricing and subsidy mechanisms.
He added that such activities have also led to supply disruptions at petrol stations, affecting logistics firms’ ability to meet delivery schedules.
Chia pointed to several systemic weaknesses that enable diesel leakages, including poor data integration among enforcement agencies such as the Ministry of Domestic Trade and Cost of Living (KPDN), Customs and the police, which limits early detection.
He also highlighted flaws in the quota system, noting that flat-rate subsidies are not aligned with actual usage, such as mileage and load factors, while the lack of real-time identity verification for subsidy cards increases the risk of misuse.
While welcoming the Subsidised Diesel Control System (SDCS) as a step forward, he stressed that its implementation must be seamless to avoid creating cash flow pressures for small and medium enterprises (SMEs).
“As long as there is a large price gap, smuggling will persist. The illegal margins are simply too attractive,” he said.
To address the issue, Chia proposed greater digitalisation, including the use of telematics or GPS tracking on industrial tanks and tankers to monitor fuel movement in real time.
He also called for subsidy allocations to be based on operational profiles rather than fixed quotas.
While enforcement actions such as raids and roadblocks remain necessary, Chia said they are insufficient on their own.
“We need structural reforms. Without integrated monitoring systems and smart data, smugglers will continue to find ways around enforcement,” he said, adding that stricter penalties across the supply chain are needed to serve as an effective deterrent.
