How not to implement a targeted fuel subsidy

Lim Chee Han

The targeted subsidy on diesel alone can save the country RM4 billion, the government says. – The Malaysian Insight file pic, June 17, 2024.

CAN one man save the country? No, I don’t think so, maybe not you, unless your name is Anwar Ibrahim.

Recently, the prime minister responded to criticism of the targeted subsidy policy decision by claiming that all previous prime ministers had agreed to the targeted subsidy, but none had the political will to implement it.

It was unpopular, he said, and he had no choice but to save the country.

Ok, I conceded, he is in a great position to save the country because he is the prime minister, the one person who holds the highest office with the greatest executive power.

Many of the promises he and his coalition party colleagues made in the last general election that brought them to power, those policy and institutional reforms, can indeed save the country.

But what does Anwar have to say about the failure so far to implement these reform policies?

We have not even seen progress on many reform policies, even though the Madani government has been in power for more than 1.5 years. Could it also be a lack of political will?

The leakages and misappropriation of funds resulting from corruption is a daunting challenge for any government to tackle, and without institutional reforms to strengthen anti-corruption and make public institutions like MACC independent, Anwar’s stance on anti-corruption is just lip service.

Why is it that he can be bold and swift in dealing with the angry people when it comes to removing fuel subsidies, but seems content to maintain the status quo when it comes to dealing with the political elites?

The targeted subsidy on diesel alone can save the country RM4 billion, the government says.

It is not that I personally disagree with the policy of rationalising subsidies, but the way this government is implementing it is almost reckless or suicidal, ignoring the consequences of a sudden increase in the price of diesel on many aspects of the economy and businesses.

In the past, when international oil prices have risen, an under-pressure government has often planned to raise fuel prices gradually so that the rakyat don’t feel the sudden impact and the economy can adjust more easily to the shock.

Ironically, when this Madani government came to power, it proudly declared that it cared about the people’s cost of living and vowed to reduce it as one of its government priorities.

The government has even revived the inter-ministerial National Action Council on Cost of Living, which meets regularly to look into cost-of-living issues.

I wonder if they have discussed the mechanism to deal with the price shock of one of the most common commodities in transport, and the medium to short-term impact of the policy on inflation and hence the cost of living of the people.

Even the most controversial GST tax policy implemented by the then BN government led by Najib Razak in April 2015, the government had already introduced the so-called Bantuan Rakyat 1Malaysia (BR1M) in March 2012.

You may find the BR1M cash handouts inadequate, but this was done with a three-year buffer, at least there was some sort of social safety net to minimise the economic impact.

Returning to the issue of the total removal of the diesel subsidy in one fell swoop, many logistics operators rushed to register for the fleet card the day before the diesel price hike.

By 12 June, some 200,000 vehicles were reported to have been approved for registration under the Subsidised Diesel Control System (SKDS) programme by the Ministry of Domestic Trade and Cost of Living, and the government realised that the rush to get the Fleet Card meant that the supposed beneficiaries would not receive the subsidy in time due to distribution and delivery delays.

So, the government, through the Finance Ministry, has come up with a measure to reimburse eligible owners of logistics vehicles who have not yet received their fleet cards; those affected can apply for reimbursement from July 1.

It may not be too difficult to foresee this chaotic scenario, but the government seems incapable of planning well.

Some find it amusing (but certainly not funny) that there is a separate Budi Madani portal for the disbursement of the diesel subsidy, and wonder whether it shouldn’t be Padu that is supposedly doing the work of finding the rightful beneficiaries after so much painstaking campaigning on Padu about its great power.

Perhaps this is understandable for SKDS, since the logistics vehicles are usually owned by the company, and the fleet cards do not go directly to the drivers, but through the company.

But how do you explain Budi Individu? Wouldn’t the Transport Ministry know who is driving a diesel car with the right type of vehicle and who is eligible for the subsidy?

The billion-dollar question is, can the RM4 billion saved save the country? I don’t know, save the country, but for whom? – June 17, 2024.

* Lim Chee Han is a founding member of Agora Society and a policy researcher. He holds a PhD in infection biology from Hannover Medical School, Germany, and an MSc in immunology and BSc in biotechnology from Imperial College London. Health and socioeconomic policies are his concerns. He believes a nation can advance significantly if policymaking and research are taken seriously.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.

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