Govt to save RM2bil a year with subsidised diesel initiative

PUTRAJAYA: The Budi Madani Diesel programme, which will see the fuel subsidised at RM2.10 a litre from July, is expected to generate savings of up to RM2 billion annually through the reduction of fuel subsidy leakages.

Finance minister II Amir Hamzah Azizan said the targeted diesel subsidy reform aims to standardise the diesel subsidy mechanism nationwide through a single system that is uniform, transparent, and user-friendly.

This is in line with the government’s principle of ensuring that subsidies reach those who are genuinely eligible while safeguarding the stability of domestic diesel supplies.

“Through this targeted subsidy programme, we can save up to RM2 billion a year. These savings will be returned to the people through the reduction of diesel prices to RM2.10 a litre,” he said at a press conference here today.

Present were domestic trade and cost of living minister Armizan Mohd Ali and Treasury secretary-general Johan Mahmood Merican.

Amir said the government’s previous monthly subsidy burden for petrol and diesel was approximately RM800 million, but this surged sharply to nearly RM4.7 billion in March and RM4.9 billion in April following rising global oil prices.

At the same time, diesel consumption increased abnormally from about 624 million litres a month to almost 1.2 billion litres a month, indicating the existence of significant leakages.

The leakages occurred through activities such as cross-border smuggling and abuse of subsidy channels, where parties that should have been purchasing unsubsidised diesel were obtaining subsidised diesel from petrol stations instead.

This not only placed pressure on the government’s finances, but could also disrupt and threaten domestic diesel supplies.

Amir said diesel consumption patterns in Sabah and Sarawak also showed unusual trends, with current usage approaching two billion litres annually compared with an estimated actual requirement of about one billion litres annually.

He said the figures indicate leakages of as much as one billion litres a year, which need to be addressed more effectively.

Consequently, the government is introducing BUDI Diesel using a MyKad verification mechanism, similar to BUDI95, to ensure that only eligible Malaysians receive the subsidy.

“A total of 700,000 private diesel vehicle owners will enjoy subsidised diesel at RM2.10 a litre through the use of MyKad under the BUDI Diesel mechanism at all petrol stations nationwide,” he said.

For existing BUDI Diesel individual recipients, the current RM400 monthly cash assistance will be replaced with direct diesel subsidies through MyKad verification at petrol stations.

Amir said the current beneficiaries will be automatically migrated to the new mechanism without needing to submit any additional applications.

“As preparation for full implementation on July 1, early access to BUDI Diesel will be opened from June 27 for eligible private diesel vehicle owners in Peninsular Malaysia,” he said.