Thursday, November 20, 2008

Malaysia Ends Fuel Subsidies, Maybe For Good

KUALA LUMPUR: Every time a Malaysian motorist pumps petrol into his car these days, the government makes a profit of 30 sen (8 US cents) for every litre. This is a dramatic switch from just months ago when every drop was subsidised by the government.

The old system of government fuel subsidies has been removed, thanks to the sharp falls in global oil prices in recent months, officials say.

The Malaysian government now says that it is considering scrapping the fuel subsidies even if global crude oil prices were to rise again.

"We have stopped subsidising petrol from the time when the pump prices were cut to RM2 per litre," domestic trade and consumer affairs minister Shahrir Samad said on Tuesday (18 Nov).

At current prices, the government makes about 30 sen for every litre of petrol sold at fuel stations.

The government on Tuesday cut pump prices by 7% to RM2 per litre for unleaded petrol.

But many Malaysians were unaware of the profit that the government is making.

Now that more people know about it, they want the government to reduce the price of petrol further or to bring the subsidies back.

"I don't understand why they don't cut prices further. Does it mean that we are now subsidising the government?" asked 30-year-old executive Leong Wan Yen.

Internet chatter shows the same unhappiness as citizens ask for cheaper fuel to compensate for the ever-increasing prices of goods and services.

The prices of things, from chicken rice to schoolbooks, have jumped due to the 41% hike in fuel prices implemented by the government in June.

The hike pushed Malaysian inflation to 27-year highs in the following months.

But while many Malaysians are unhappy, economists say the money saved from fuel subsidies could be used for development projects such as building schools.

Before the June cut, for every ringgit of government expenditure, 30 sen was channelled to fuel subsidies. Now, economists estimate that the savings on subsidies next year could total more than RM10 billion.

Still, the government is facing pressure to lower pump prices.

"The federal government should reduce the price of petrol further to RM1.62 per litre so that the people need not pay extra and at higher prices than (in) the open market," opposition leader Lim Guan Eng was quoted as saying by the Malaysiakini online news.

Shahrir said the government would decide by the end of the month whether or not to reinstate the subsidies if global oil prices went up again. (By HAZLIN HASSAN/ The Straits Times/ ANN)

Malaysia Ends Fuel Subsidies, Maybe For Good
Sin Chew Jit Poh, Malaysia