How Diesel And Other Fuel Subsidies Work In Malaysia?

Malaysians have long enjoyed the benefit of purchasing fuel at relatively low prices. As of June 10, 2024, the petrol price in Malaysia is the ninth cheapest in the world at USD 0.43 per liter. In contrast, the average petrol price worldwide is USD 1.23 per liter, significantly higher than in Malaysia.

The Malaysian government has heavily subsidised petrol and diesel prices, spending billions of ringgits to maintain these low prices. In 2022, this subsidy expenditure amounted to RM28 billion, making Malaysia the third highest country in the world for petrol subsidies.

Reformations In Fuel Subsidies

The most common types of fuel used in Malaysia are RON95 petrol, RON97 petrol, and diesel. RON97 petrol, typically used in high-performance engines, is superior to RON95 petrol due to its higher Research Octane Number (RON). A higher RON means that the fuel can withstand more compression and generate more power, making RON97 petrol more expensive.

Diesel is commonly used in heavy vehicles such as trucks, lorries, buses, and tractors, as well as in cars with diesel engines.

In the 1980s, the Malaysian government began offering subsidies for fuel to help low-income households afford it at prices lower than the market rate. When the market price exceeded the retail price, the government covered the price difference to maintain fuel prices at a certain level. However, as petrol prices continued to rise over the years, the increasing subsidy expenditure became a significant financial burden on the government.

In 2014, the government introduced a managed float system, allowing fuel prices to be adjusted according to market rates. Since February 2021, the prices of RON95 petrol and diesel have been maintained at RM2.05 and RM2.15 per liter, respectively. These prices are much lower compared to the average world price of petrol and diesel, which stands at USD 1.23 per liter (approximately RM5.79 per liter).

The subsidy for RON97 petrol was removed in 2010. Since RON95 petrol prices are subsidised by the government, this fuel is only accessible to locals. Foreign-registered vehicles, including motorcycles, can refuel with RON97 petrol at petrol stations throughout the country.

Read Also: What Is RON95, And Why Can Only Malaysian-Registered Vehicles Pump In Malaysia?

New Targeted Diesel Subsidy

In response to the growing subsidy expenditure, the Malaysian government has implemented a targeted subsidy plan for diesel starting in June 2024. Under this plan, the price of diesel will be set to align with the market rate, with the new diesel price established at RM3.35 per liter effective June 10, 2024.

Despite this adjustment, the government will continue to offer targeted subsidies for certain eligible sectors. These subsidies include:

Fishermen: The price of subsidized diesel will remain at RM1.65 per liter.

Land Public Transport: School buses, express buses, ambulances, and fire engines will benefit from the Subsidized Diesel Control System (SKDS) 1.0 fleet cards, allowing them to purchase diesel at RM1.88 per liter.

Logistics Vehicles: These vehicles are entitled to the Subsidized Diesel Control System (SKDS) 2.0 fleet cards, enabling them to purchase diesel at RM2.15 per liter.

The SKDS fleet cards allow individuals to buy diesel at a subsidised price up to a certain volume limit.

In addition to these subsidies, the government will provide a Budi Madani cash assistance of RM200 per month to individuals who own a diesel vehicle and small-scale farmers. Eligible recipients can apply for this cash assistance through the Budi Madani platform.

Read Also: 5 Cheapest Cars In Malaysia That You Can Buy In 2023

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