Tuesday, February 23, 2010

Government scraps tiered fuel subsidies for simpler ways

The government is looking at simpler ways to subsidise fuel for consumers after quietly scrapping the proposed tiered fuel subsidies scheduled for May 1 due to its complexity.

Industry sources said Putrajaya made the decision “recently” after complaints that the new subsidy system which uses MyKad for petrol purchase could be a hassle for consumers and petrol dealers apart from causing congestion at fuel stations.

“Oil industry executives have been asked to stop implementing the tiered subsidy system as the government has stopped it,” an industry source told The Malaysian Insider.

A consultant working on the programme confirmed the move, saying “the decision was made fairly recently.”

“It was just too complex and unwieldy,” he admitted to The Malaysian Insider, referring to the tiered subsidy system.

Under the programme that was being handled by Malayan Banking Berhad, motorists had to register using their Mykad to be eligible for some subsidy for one vehicle from May 1.

However, petrol dealers complained of additional costs despite making only 12.19 sen per litre for petrol and seven sen per litre for diesel. RON95 petrol is currently sold at RM1.80 a litre, RON97 and diesel at RM2.05 and RM1.70 a litre respectively. Shell is the only retailer selling the premium RON 97 Shell V Racing at an unsubsidised price of RM2.38 a litre.

The government has never revealed the tiered fuel subsidy system but went only as far to say that foreigners would not be eligible for subsidised prices. Fuel prices in Malaysia are cheaper than neighbours Indonesia, Singapore and Thailand.

Foreign motorists are only allowed to buy fuel up to 20 litres within 50km of the borders except for the unsubsidised premium Shell V Racing petrol.

“Now the authorities will find another way to implement subsidies without burdening the public and the petrol dealers,” the industry source added.

There is speculation that the government will raise retail prices by 10 sen in the short-term while mulling proposals for a better subsidy system. Global oil prices have steadily risen and are now at US$79 (RM269) a barrel.

In 2007, the authorities raised retail prices until they peaked at RM2.70 a litre leading to widespread protests and contributed to the ruling Barisan Nasional’s historic losses in Election 2008. It is learnt that Prime Minister Datuk Seri Najib Razak is keen to avoid protests that helped drive predecessor Tun Abdullah Ahmad Badawi out of office.

This is not the first time that the Najib Administration has pulled back an unpopular move before it is implemented. Last December He retracted an unpopular 5 per cent Real Property Gains Tax (RPGT) Budget 2010 proposal for properties sold after five years.

Businessmen complained the move was unfair as it the RPGT was meant to cool down speculation in the property market, not tax those who are genuinely selling after holding their properties for a reasonable amount of time.

For the petrol subsidies, Petrol Dealers Association of Malaysia (PDAM) president Datuk Hashim Othman anticipated a longer time to process transactions as biometrics have to verify the vehicle owner’s identity through thumbprint scanning and this could lead to possible congestion at the petrol stations.

“Experts in the field may say it is applicable but people on the ground are worried that the thumbprint scan, which is similar to the practice in the airport, may delay transactions and create congestion at petrol stations,” The Star quoted him as saying this week.

Hashim had said the government was still negotiating the quota of fuel subsidy that each car owner would be entitled to.

“The idea to give fuel subsidy to deserving people is good but we are worried that the system may be complicated and cannot address arising problems.”

Deputy Domestic Trade, Co-operatives and Consumerism Minister Datuk Tan Lian Hoe, when met at the Perak Chinese Chambers of Commerce and Industry Chinese New Year open house on Monday, said her ministry was still gathering feedback on the matter from the people.

news courtesy of Malaysian Insider

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