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Pilots of fuel subsidy would be set in Malaysia

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Data collected in Wapcar.my, Finance Minister Tengku Zafrul recently revealed that high-income Malaysian residents in the top 20 (T20) benefit from RM8 billion in fuel subsidies, compared to RM6 billion that the group of 40 (B40) has. the lowest income is entitled to. This suggests that the current block fuel subsidies are more beneficial to the wealthy and a more targeted subsidy scheme is needed, taking petrol price Malaysia into consideration. As revealed in an interview, the government is currently testing eWallet as a platform to implement targeted fuel subsidies. 

In an interview with BFM, Deputy Secretary General for Treasury Policy of the Ministry of Finance, Datuk Johan Mahmood Merican, said that RON95 is currently sold at the pumping station for RM2.05/liter, but the actual price is much higher. double us. . to pay for. The challenge is how to allow lower income groups to benefit from lower subsidy prices while allowing higher income groups to pay higher prices. 

Citing a household spending survey,  the average B40 household spends around RM165 per month on fuel while the T20 pays around RM500. This shows that the high-income group is subsidized 3 times more than the B40 group. The bigger question, he said,  is how do you segment this? 

Johan said there are limits to the effectiveness of helping families if we just raise prices and transfer cash. Some B40s consume more than others, so it’s not necessarily fair. 

He added that one thing they are looking at is how to design a mechanism where the pump price is higher, but this mechanism allows defined groups such as  B40 and M40, to be able to purchase at least one fuel quota at subsidized prices. He said it is almost like copying the electricity bill of Tenaga Nasional Berhad (TNB), in that if you consume less, you will pay a lower price and if you consume more, you will have to pay. higher price. 

Although TNB has one power meter per home, the challenge is that vehicle owners can go to multiple service stations to buy fuel. Therefore, there must be a centralized subsidy system that is accessible to all target groups, regardless of which gas station they go to. He shared that the government has started pilot testing with gas stations using the eWallet platform and they are looking at another three to six months of testing before it is ready to go. 

This is something they don’t take lightly and they need to make sure it’s easy to use. He admitted that although city dwellers are used to e-wallets, they may not be easy to use for rural people and the elderly. He hopes that once the targeted subsidy scheme is in place, it will not create too many problems for the rakyat.

A one-off fuel subsidy was launched in 2008 in Malaysia.

In 2008, the government provided a one-time fuel subsidy of up to RM625. Owners of motor cars up to 2,000 cc (2.0 L) as well as jeeps or trucks with engines up to 2,500 ccs (2.5 L) are eligible to receive RM625. Meanwhile,  owners of motorbikes with engines up to 250cc can get a subsidy of RM150. Cash reimbursements for petrol benefits have been paid through post offices nationwide and vehicle owners will be required to show identification and fill out a form. 

One-time Fuel Cash Assistance was introduced after the world oil price spiked and the government capped the price of RON97 gasoline at RM2.70/liter from 5 June 2008. With the cash aid amount, this subsidy is aimed at reducing the price of fuel used by 800 liters per year and consumers will effectively pay the old price of RM 1.92 per liter for RON gasoline. 97. 

However, this incentive-based approach to subsidies has been criticized because it still benefits the wealthy. There are high-end cars on the market that use engines with a smaller capacity of fewer than 2 liters but with turbochargers.

When it comes to the implementation of targeted fuel subsidies, is it the greatest method to adapt the eWallet?

From past government e-wallet initiatives, it seems that these platforms are a quick and easy way to provide cash support to a target group. We saw this with the eTunai RM30, which targeted Malaysian adults with an annual income of less than RM100,000, and it was repeated a year later with the RM50 ePenjana program. 

This year, the government also disbursed an RM150 e-wallet credit to Malaysian youth under the ePemula scheme. Even if an individual uses multiple e-wallets, there is no double deduction as initiatives can only be claimed by the CI once after verifying the e-wallet. 

In addition to accessing personal income conditions, the same system can integrate vehicle registration details so that only car owners of certain models in the B40 and M40 groups are entitled to cheap gasoline and diesel. The actual details of this mechanism are yet to be revealed, but we suspect the grant can be paid as an instant refund to your e-wallet once you complete the fuel purchase. 

Currently, there are e-wallets with integrated fuel pumps, such as Steel for Petronas and Touch `n Go eWallet for RFID fueling at Shell. If the mechanism uses QR codes, it can lead to long queues at the counter unless each gas station adds a unique QR code or reader to the pump. 

While a targeted fuel subsidy approach could further increase e-wallet adoption in Malaysia, it could be a challenge for users who are not tech-savvy or who still use feature phones. Perhaps there could be a hybrid solution where the targeted fuel subsidy mechanism could be extended to prepaid or verified debit cards as an alternative to e-wallets.

When targeted fuel subsidies are implemented, pump prices will reflect actual market prices. This will also help address concerns about foreign vehicles receiving fuel subsidies while visiting Malaysia. 

What do you think of such an approach? Welcome your comments below.

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