KUALA LUMPUR: The government is proceeding with a two-tier pricing system for RON95 fuel best suited to address inflation.
Economy Minister Rafizi Ramli said the government acknowledges that there is no perfect approach to implementing a mechanism for targeting fuel subsidy.
However, the government's priority is to avoid inflation and rising prices, which has led them to settle on the two-tiered pricing system.
He said the government had implemented a 20-month pilot project using this system from 2022 to 2023.
The two-tier pricing system would introduce two prices at petrol stations—one that is subsidised and the other that is not—using several methods currently under consideration, namely identification cards and e-wallets.
Rafizi explained that the alternatives, which are cash hand-outs and a levy based on vehicle ownership, would be riskier and would increase inflation.
"There is no perfect approach—each method comes with risks related to operational issues, fraud, and costs. However, the government prioritises controlling prices and curbing inflation above all.
"Although we are aware that the two-tier system carries some operational risks at petrol stations, this can be refined over time. In comparison, implementing a measure that causes inflation would be far more challenging and burdensome for the people," he said in the Dewan Rakyat.
Rafizi was responding to a question from Suhaizan Kaiat (PN-Pulai) on whether the government would consider the levy system when the public renew their road tax, as the two-tier pricing system could cause congestion at petrol stations.
Rafizi said that when the government matched household data in the Central Database Hub (Padu) with data from the Road Transport Department (RTD), they found a mismatch in the system, which would come with a high risk of exclusion.
He also acknowledged that various challenges may arise if the identification card mechanism is used for eligibility verification, including infrastructure issues, particularly slow internet access in rural areas and damaged identification card chips, as well as risks related to identity verification and misuse of identification cards.
"Therefore, the government is committed to ensuring that the chosen mechanism is appropriate and does not burden the people," he said.