THE STAR - Thursday, 5 May, 2005
(Page 1)

Move is to increase in subsidies, says Government

PETALING JAYA: The price of petrol is up by 10 sen a litre and diesel at petrol stations by 20 sen from Thursday.

RON97 (premium) petrol is RM1.52 per litre and RON92 (regular) RM1.48 per litre in Peninsular Malaysia.

In Sabah, the price of RON97 is RM1.50 per litre and RON92 RM1.48, and in Sarawak, RM1.51 and RM1.48.

The price of diesel at petrol pumps has risen from 88.1 sen to RM1.081 per litre in Peninsular Malaysia, while the new price in Sabah is RM1.084 and in Sarawak RM1.078.

Announcing the Cabinet’s decision yesterday, the Prime Minister’s Office said in a statement that the move was to stem increases in subsidies that the Government paid for petroleum products.

Last year, such subsidies cost the Government RM4.8bil.

The estimated subsidy this year would be RM8.9bil had the prices of the two items remained the same.

With the new rates, the expected subsidy this year would be RM6.7bil, allowing the Government to save RM2.2bil.

Subsidies, the statement added, were not a good way to help sectors that needed the fuel, because it created a market distortion. This would subsequently result in an inefficient manner of fuel consumption, it added.

“Market distortion will bring about abuse, with subsidised fuel being sold to those who are not entitled to it,” it said.

It also brought about smuggling of fuel to neighbouring countries where the prices were higher, which meant that taxpayers’ money was benefiting people outside the country.

Assuming 10% of the supply was smuggled, it said, RM480mil of taxpayers’ money would have benefited non-Malaysians last year.

With the increase in diesel price, the difference between the market and subsidised prices would be narrowed and this should reduce abuse and smuggling, it said.

The statement said that even with the new prices, fuel in Malaysia was still cheaper than in many other Asean countries.

It said that despite skyrocketing international prices, the increase in retail price for petrol and diesel in Malaysia was low.

“Although the international price of petrol had gone up by 65.35 sen a litre and diesel by 75.49 sen per litre between January last year and April this year, the retail price in Malaysia only went up by seven sen per litre for petrol and 12 sen per litre for diesel during the same period,” it said.

The Government increased the price of diesel by five sen two months ago while the last increase for petrol – also by five sen – occurred in October last year