Temporary Adjustment Of Fuel Subsidiy Balances People's Welfare And National Fiscal Discipline - Analysts

By Mohd Fharkhan Abdul Ghapar

KUALA LUMPUR, March 28 (Bernama) -- The government's strategic move to temporarily adjust the fuel subsidy mechanism is seen as an effort to find a balance between the welfare of the people and the country's fiscal discipline in facing the impacts of geopolitical uncertainty in West Asia.

Universiti Teknologi MARA (UiTM) Faculty of Administrative Science and Policy Studies senior lecturer Mujibu Abd Muis said that the temporary adjustment of the Budi MADANI RON95 (BUDI95) programme, effective April 1, is considered an important step towards targeted subsidies to prevent leakage and ensure optimal use of fiscal resources.

He said that in principle, this step can be considered appropriate and responsive, especially in the context of global energy price volatility.

"The West Asian crisis exerts external pressure on global energy prices, and this government measure is seen as capable of relatively reducing the impact, not eliminating it entirely.

"Interventions such as targeted subsidies and price controls help absorb some of the cost shocks, especially for vulnerable groups ... in the current economic situation, blanket subsidies are no longer sustainable, so the shift to targeted subsidies is a necessary reform step, even though it is not popular," he told Bernama.

On Thursday, Prime Minister Datuk Seri Anwar Ibrahim announced several strategic national measures to strengthen Malaysia's preparedness to face the global energy crisis following the conflict in West Asia, including maintaining the subsidised price of BUDI95 petrol at RM1.99 per litre, with a temporary adjustment of the monthly quota from 300 litres to 200 litres.

Additionally, the ceiling limit for targeted RON95 petrol subsidies for e-hailing and gig workers is also maintained up to 800 litres, while people in Sabah and Sarawak will continue to enjoy subsidised diesel at RM2.15 per litre and the public service sector is allowed to work from home in a phased and selective manner.

Commenting further, Mujibu said that the temporary adjustment of BUDI95 will, however, face its own challenges, including the existence of a 'squeezed middle' group that is not statistically poor but is significantly affected due to the issue of usage exceeding 300 litres.

Therefore, he believes it is appropriate for the government to consider an appeal mechanism or conditional flexibility, so that this policy remains fair without compromising the objective of fiscal savings, while also emphasising that this approach reflects the subsidy reforms that need to be implemented in the current economic situation.

"The challenge is to ensure the social legitimacy of this policy remains high, so that the people understand the rationale behind the short-term sacrifices," he said.

He said that at the same time, the actions of a minority who play on sentiments as if the government is neglecting the people can disrupt public perception and undermine economic confidence.

In a crisis situation, he said, fact-based narratives can trigger market psychological instability, therefore, it is important for all parties to practice data-driven discourse and shared responsibility, not just political rhetoric.

Meanwhile, the Federation of Malaysian Consumers Associations (FOMCA) views the decision to maintain the subsidised price of BUDI95 as an important step in protecting consumers from the chain reaction of price increases, thereby helping to curb the pressure of the cost of living amid the uncertainty of global fuel prices.

FOMCA chief executive officer Dr T. Saravanan said that overall, the measure is capable of providing short-term relief and stabilising consumer sentiment, but a long-term solution requires a more comprehensive structural reform in subsidy policies and cost of living management.

In this regard, he said improvements in subsidy targeting and the use of integrated data are very much needed to ensure that assistance reaches the groups that truly need it, as there are groups that have been left out, particularly among the M40 and informal workers.

"For Sabah and Sarawak, maintaining diesel prices is critical to controlling logistics costs and preventing price increases for goods. However, structural issues such as supply chain efficiency and the role of intermediaries also need to be addressed comprehensively," he said.

According to him, in the current situation, the increase in the prices of goods and services may be unavoidable, but any unreasonable or exploitative increases should be taken seriously and action should be taken by the authorities.

Sharing the same view, economic analyst Associate Professor Dr. Zainizam Zakariya said that in the current situation, the government is trying to balance three conflicting demands, namely protecting the people, controlling the fiscal deficit and ensuring a stable fuel supply.

He said from a public economics perspective, this move makes clear sense because the government is facing a very rapid surge in subsidy bills.

Explaining further. Zainizam, who is also the head of the Department of Economics at the Faculty of Management and Economics, Sultan Idris Education University, said from the consumer's perspective, the impact of this temporary adjustment is not the same across all groups.

He said that almost 90 per cent of eligible citizens use less than 200 litres of petrol per month, with an average usage of around 100 litres per month, so this means that the majority of users will not be directly affected.

"However, for groups that truly require long-distance travel every day, such as cross-district commuters, rural households, or those who heavily rely on private vehicles due to public transport constraints, the additional burden may be felt." he added.

-- BERNAMA