When it comes to the rationalisation of the RON95 subsidy, it might be implemented gradually to reduce ‘shock’. Sitting pretty at RM2.05/litre at the moment, the complete subsidy removal would increase its retail price to RM3.30/litre and the Malaysian government doesn’t want to take everyone by surprise, Harian Metro reported.

Before the RON95 subsidy rationalisation can even begin, the government will need time to assess two key factors related to the matter – PADU’s database system readiness and the impacts in relation to the diesel price adjustments.

With enough time for data collection and assessment, a proper strategy can be implemented which is vital considering the fact that the impact will affect over 36 million vehicles on the road here in Malaysia, or over RM66 billion in automotive fuel retail sales as recorded back in 2023.

What we can expect is a slight adjustment in the RON95 subsidy, which might see an RM0.40 increase to RM2.45/litre sometime in the last quarter of 2024. More details on the country’s fuel subsidy programme will be presented in the upcoming Budget 2025, which has been scheduled to take place in October this year.

It is said that for every RM0.10 increase in fuel prices, the government can save around RM2 billion from the subsidy budget (assuming that 20 billion litres of fuel were purchased that year). RM0.40? Do the maths.

It’s all assumptions and predictions for now, but we will know more in the coming months. If the RM0.40 increase does happen, 30 litres of RON95 will cost you RM73.50 instead of RM61.50 right now.

Source : Car List

With subsidy rationalisation for diesel done and deemed a success by the government, the question on everyone’s lips is when is the turn of RON 95 petrol? That’s the big one that will affect most of us, and so far, the government has been tight-lipped on the timeline. Expect a last minute announcement, as per diesel.

They might not have the luxury of time though. Citigroup’s chief Malaysian economist Wei Zheng Kit said this week that Malaysia’s fiscal spending in the first five months of 2024 reached 53.9% of the full-year target, surpassing the year-to-date spending levels of previous years. And to meet the country’s deficit target, things need to be done.

As such, fuel subsidy rationalisation for RON 95 petrol might happen as soon as this month, he told Bloomberg.

According to the business publication, Malaysia’s budget deficit was 5% of GDP last year and prime minister Datuk Seri Anwar Ibrahim aims to bring the figure down to 4.3% by removing blanket subsidies, in a bid to attract more investments into the country.

Last year, Malaysia’s allocation for subsidies was around RM81 billion, and the bulk of it went to fuel subsidy to keep RON 95 at RM2.05 per litre and diesel at RM2.15 per litre. It is said that subsidy rationalisation for diesel could save the government RM4 billion per annum.

Citi estimates that the government can save an additional RM3 billion to RM4 billion this year if a 30 sen per litre increase for RON 95 is implemented this month, taking the pump price to RM2.35 per litre. This assumes a gradual increase to market price, and not a big overnight jump.

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