LETTERS: The debate on phasing out fuel subsidies has been going on for a long time. The idea of deploying targeted rather than blanket subsidies has been talked about before.
Many supported the rationale for such a move. It would not only address the country's fiscal issues, but also resolve the leakages that have proven difficult to manage.
It is a hard decision to make. Many experts know it is painful but necessary if the country is to escape the middle-income trap.
Not to mention our commitment to net-zero greenhouse gas emissions.
Thus, we should support the government for taking the bold step to implement the rationalisation.
The pump price of diesel is floated in line with the world market price. The impact on the economy is closely monitored. The monitoring and analysis of the feedback will alert the authority to gaps that may exist.
Some groups of diesel users still enjoy subsidies to cushion the impact on the economy, especially the prices of food and other public necessities.
It is disconcerting to hear grouses on this. We need to give time to generate the necessary feedback that would further improve the scheme.
There is no doubt that subsidy rationalisation is crucial for the nation's economy. Experts say subsidies distort the market and provide opportunities for cartels to take over, which hinder fair competition.
We know how cartels distort the market for food and fertiliser in the country. While diesel subsidies aim to make energy more affordable, they have several negative impacts on sustainability.
By making fossil fuels cheaper, subsidies encourage higher consumption, leading to greater greenhouse gas emissions, contributing to global warming and climate change.
Subsidies distort the energy market by making fossil fuels artificially cheap, making it harder for renewable energy sources like solar, wind, and hydro to compete.
This hampers the development and adoption of cleaner, more sustainable energy technologies.
Higher consumption of fossil fuels leads to more extraction, processing, and transportation of these resources, which can cause significant environmental damage, such as habitat destruction, oil spills, and air and water pollution.
Fuel subsidies can also lead to economic inefficiencies by encouraging the overconsumption of fossil fuels.
This can result in higher overall costs for society, as the negative externalities such as health impacts from pollution and environmental clean-up costs are not accounted for in the price of the fuel.
Subsidies can drain government resources that could otherwise be invested in sustainable infrastructure, such as public transportation, energy efficiency programmes, and research and development for renewable energy technologies.
Fuel subsidies often disproportionately benefit wealthier individuals who consume more fuel, while the poor receive less benefit, exacerbating social inequality and divert resources from programmes that directly target poverty reduction and sustainable development.
By supporting the existing fossil fuel infrastructure, subsidies create a lock-in effect where economies become dependent on fossil fuels, making it more challenging and costly to transition to sustainable energy systems.
Moving away from fuel subsidies and investing in sustainable energy solutions is crucial for achieving long-term environmental and economic sustainability.
Daring to implement the diesel rationalisation sets the current administration ahead of all the past governments.
PROFESSOR DR AHMAD IBRAHIM
Tan Sri Omar Centre for STI Policy
UCSI University
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times