KUALA LUMPUR: The government estimates that it will save between RM7.2 billion and RM7.5 billion a year from targeted diesel subsidies, at least 80 per cent more than expected.
Finance Minister II Datuk Seri Amir Hamzah Azizan said the government anticipated to get about RM4 billion in savings a year from the diesel subsidy rationalisation rolled out in July.
"At the moment, we are tracking about RM600 million a month so that should give us about RM7.2 billion to RM7.5 billion a year. "We're doing so much better because the leakages were a lot more than we thought. That's only Peninsular Malaysia," he said at the Forum Ekonomi Malaysia.
Amir Hamzah said the leakages that happened for diesel were taking place in the commercial sector. Malaysia also saw leakages from border crossing as Malaysia's diesel price was significantly lower than other countries.
"If I do not close the arbitrage that exists between Malaysia and other countries, the leakages will continue to progress. So we applied a two-tier mechanism. Segments that we wanted to protect were allowed to buy subsidised diesel and we used technology to facilitate control by using fleet cards," he said. Cash transfers of RM200 are also given to certain segments under the Budi Madani initiative.
Amir Hamzah said these methods enabled the government to float the price of diesel at market price. "The good thing is we have gotten society to also get used to the movement of weekly prices," he said. On the targeted subsidy for RON95, Amir Hamzah said the government will implement a two-tier pricing system in an effort to protect 85 per cent of the population.
The Finance Ministry is working together with the Economy Ministry to outline the mechanism for the subsidy roll out, details of which will be given in a couple of months.
"I understand that many people are wondering about the kind of mechanism that we will implement but that will take some time. "We cannot take any shortcuts because we have to make sure everything goes smoothly," he added.