Clear the air on diesel decision, say experts

clear the air on diesel decision, say experts

Petrol prices being displayed at an digital board outside petrol station. The government planning to implement a price control programme on RON95 petrol, diesel and LPG, which is expected to involve subsidies of RM6bil this year. — YAP CHEE HONG/The Star

PETALING JAYA: The implementation of diesel subsidy rationalisation must be transparent to ensure a smooth transition and for people to accept the change, say economists.

Gaining public support for the policy change, which is needed as the country moves towards fiscal responsibility and long-term economic stability, is important, they said.

The transition is likely to bring occasional price increases, says Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid.

“Consumers and businesses will have to be on guard and anticipate higher prices during this period,” he said.

Universiti Malaya’s Prof Dr Mohd Nazari Ismail also pointed out that the details of the government’s plan are still unclear.

“In the long run, prices will go up once the rationalisation is implemented,” he said.

To avoid a sharp rise in the cost of goods and services, subsidies will continue for traders using diesel-powered commercial vehicles and public transportation.

From May 16 to Wednesday, diesel retailed for RM2.15 per litre, and RM2.05 per litre for RON95 petrol.

In February, Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali announced that the government was restructuring a targeted subsidy plan for diesel in the peninsula, to be implemented by the second quarter of this year.

Mohd Afzanizam emphasised the importance of managing the transition effectively.

He suggested higher allocations for the Sumbangan Asas Rahmah (Sara) and Rahmah Cash Aid (STR), along with targeted subsidies, to help mitigate the impact.

“A clear timeline and visible positive outcomes are crucial. If the public sees this, negative sentiments can be managed,” he said.

Mohd Nazari said the planned implementation as announced by Anwar indicates there would not be a sudden increase in essential goods prices in the short term.

“Many groups will still have access to subsidised diesel, so the public should react positively. The government’s approach is the best way to reduce expenditure and control public debt. The public must understand that the government cannot keep borrowing to fund expenses,” he added.

Federation of Malaysian Consumers Associations (Fomca) chief executive officer Dr Saravanan Thambirajah stressed the importance of rationalising subsidies to prevent smuggling.

He called for stronger government action to address these issues and ensure that public funds are not wasted.

“Enforcement must be improved. Changes in taxes or subsidies can pressure traders, and some may exploit the situation for excessive profits.

“The Domestic Trade and Cost of Living Ministry should intensify enforcement under the Price Control and Anti-Profiteering Act to rein in greedy traders,” he added.

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