The Malaysian Institute of Economic Research (MIER) has proposed in a statement yesterday that RON 95 petrol subsidies be gradually reduced and the savings redirected to diesel subsidies to help businesses, The Edge reports.
“Targeted diesel support can ease cost pressures, particularly for small- and medium-sized enterprises (SME) reliant on logistics and heavy equipment,” the think tank said. It however added that such measures should remain temporary and targeted, given limited fiscal space.
Tricky one, isn’t it? RON 95 petrol is the fuel of the rakyat while diesel is largely the oxygen for businesses. It would be easy to bring up the ‘common man versus conglomerate’ argument, but as we all know, the global fuel crisis has a multiplier effect on supply chain costs – right down to your morning cup of kopi O.
You could argue that the reallocation of subsidies from petrol to diesel is already kind of happening – the Budi Madani RON 95 (Budi95) petrol monthly quota has already been reduced from 300 to 200 litres, while the Budi Diesel monthly cash help has been upped to RM400 from RM300 for April.
Unsubsidised diesel hit an insane RM6.72 a litre last week before easing to RM5.97 this week, while unsubsidised RON 95 reached a RM4.27 zenith last week before going down this week to RM4.02. Since the MyKad system has been such a success for Budi Madani RON 95 (Budi95) petrol, the government wants to replicate it for diesel, which would mean a complete system change from monthly ‘reimbursements’ to MyKad-unlocking ‘gateways’.
Economists, help us – will moving more subsidy spending from diesel to petrol be more effective in helping the rakyat from a macro perspective?
