THE government may have to bear more than RM100 billion in subsidies annually if the world crude oil price hits US$100 a barrel, Economy Minister Rafizi Ramli said.

He said the subject of targeted subsidies is unavoidable when discussing the big shift needed to strengthen the country’s fiscal position.

He was responding to a question from Johari Abdul Ghani (Titiwangsa-BN) who wanted to know the political will required to implement targeted subsidies.

Rafizi also expressed confidence that the unity government will do the right thing and will make complete changes regarding the targeted subsidy mechanism.

“In 2022, the government bore a bulk subsidy, of over RM80 billion, for RON95 petrol, diesel, liquefied petroleum gas (LPG) and electricity. Today the price of world crude oil reached US$95 per barrel and will soon reach US$100 per barrel.

“At that price (US$100), the subsidy borne by the government could exceed RM100 billion a year,” he said when winding up the debate on the mid-term review of the 12th Malaysia Plan (12MP) in Dewan Rakyat today. 

Rafizi said it would be better if this expenditure could be targeted at the people who really need it and on public services as well as other development expenditures.

He stressed that the method used needs to be fair for the people to balance other macro effects such as inflation.

Rafizi said the government has created a Primary Data Base (Padu) which will become the main mechanism for the targeted subsidies.

“The approach taken through Padu to identify eligible groups will reduce inclusion and exclusion errors by creating a centrally-based integrated database to help the government make decisions based on data.

“Padu is scheduled to be launched in January 2024 and will integrate micro-data from various government agencies, which amounts to 270. This also marks the beginning of the targeted subsidy programme,” he said.

Rafizi said the Padu system looks at information at the household level.

It will cover things such as the number of households, records of income in the household, dependent children of the household according to education level, location of the household, number of vehicles in the household, records of assistance received from government and other information that can help determine the disposable income of each household.

Answering a question from Wee Ka Siong (Ayer Hitam-BN) regarding the high-income group (T20) who may be affected by the rationalisation of this subsidy programme, especially the civil servant group, Rafizi said the government will consider these criteria and take into account factors other than income as done previously.

He said to avoid dropping out of subsidy assistance, the government will combine the criteria of disposable income while the other half is universal.

In addition, Rafizi also commented on the government’s focus on making Malaysia a high-income nation.

He said wages will also be adjusted and for that, a progressive wage policy has been introduced.

“The government has approved this progressive wage policy to create an ecosystem of employment in the private sector to raise people’s salaries periodically.

“The white paper on the progressive wage policy will be presented at the upcoming Dewan Rakyat meeting for debate,” he added. – Bernama, September 19, 2023.