Switching to targeted fuel subsidies could be backfire, says FOMCA – transparency needed

The Federation of Malaysian Consumer Associations (FOMCA) has warned that the removal of the current blanket fuel scheme could add to the rising cost of living and lead to higher inflation, according to a report. NST.

FOMCA CEO Saravanan Thambirajah explained that suppliers and traders are extremely sensitive to fuel prices and will increase the price of products if they are affected by the removal of subsidies. “Even if they enjoy subsidies, they will have the excuse that everything else has gone up, and they will have to raise their prices,” he said.

Saravanan responded to a statement from International Trade and Industry Minister Datuk Seri Mohammad Ajmin Ali, who said the government was considering a targeted energy subsidy scheme where the rich would pay more than the low-income group. It will replace the current blanket subsidy scheme, which fixes RON 95 petrol RM2.05 per liter and Euro 5 B10 diesel RM2.15 per liter for all customers.

As previously reported, the government’s total energy subsidy bill is expected to be RM28 billion for 2022, more than double the RM11 billion recorded in 2021. How the target subsidy will be implemented is not yet certain.

In addition to rising living costs and inflation (Bank Negara projects this year between 2.2% and 3.2%), Malaysians are facing declining purchasing power, an uncertain economy, as well as currency fluctuations. “If Putrajaya plans to implement it now, it must be prepared to face the wrath of the B40 and M40 groups,” Saravanan said.

Yet, he believed that a targeted subsidy could be a good thing as long as there was transparency and no room for abuse. “Many countries have implemented a targeted subsidy system, and it is time for Malaysia to do the same, but implementation requires transparency from consumers and suppliers,” he explained, adding that there should be a system that accurately identifies revenue brackets. Consumers who deserve help.

“Next, the system needs to be implemented carefully so that only low-income people accept it. Another issue that will be a big problem when it comes to subsidy claims is paperwork and bureaucracy. I hope the government will reduce the red tape and not give the people a run for their money. The simplest and easiest way to access assistance should be implemented, “he added.

Among those in the middle-income group who have lost out on benefits, Saravanan said supplementary measures should be taken to increase the purchasing power of these individuals. “The government should prioritize the needs of the people, for example, focus on projects that reduce the cost of living, so that it affects all those in need of government assistance,” he added.

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