Fuel subsidy rationalization begins: diesel increased by 56%, or RM1.20, to RM3.35 per liter from midnight June 10

The government has started fuel subsidy rationalization program with the announcement that diesel prices in Peninsular Malaysia will be floated and will retail at RM3.35 per liter starting at midnight on June 10 (Monday).

This means that from tomorrow, the price of Euro 5 B10 and B20 diesel on the peninsula will be RM1.20 (or 56%) higher than the current ceiling price of diesel. RM2.15available as of February 2021. Although not mentioned in the press release, the price is Euro 5 B7 – available now Add 20 sen per liter – should be adjusted to RM3.55 per liter.

According to Finance Minister II Datuk Seri Amir Hamzah Azizan, the new retail fuel price is based on the automatic pricing mechanism (APM) formula for May. He added that during the implementation of the targeted diesel subsidy target, the government has fixed diesel fuel prices for eligible sectors as follows:

• Subsidized diesel control system (SKDS) 2.0provide fleet tags to eligible logistics vehicles to minimize the impact of diesel prices on consumer goods prices, set at RM2.15 per liter.
• Subsidized diesel control system (SKDS) 1.0 for public land transport, including school buses, express buses, ambulances and fire trucks remains at RM1.88 per liter.
• Diesel support for fishermen maintained at level RM1.65 per liter.

The floating diesel price follows Prime Minister Datuk Seri Anwar Ibrahim’s announcement on May 21 that the government had set to implement targeted fuel subsidiesstarting with diesel in the peninsula, with that for Sabah and Sarawak Okay set aside until later. Currently, diesel prices remain at RM2.15 in Sabah, Sarawak and Labuan.

The removal of general diesel subsidies will see targeted subsidies allocated through Budi Madani support program. Announced on May 27, programme for private owners of diesel vehicles as well as small agricultural producers in Peninsular Malaysia, with those eligible in both categories receiving a monthly financial support of RM200.

It is worth noting that the RM200 aid will cover the first 167 liters of diesel. If you use more than that each month, your fuel consumption will increase. For a typical diesel pick-up truck that gets around 10 km/l, that works out to an average of 1,670 km per month before the “subsidy” runs out.

In any case, those whose diesel subsidy applications were approved before June 3 will soon receive their first Budi subsidy. “The first batch of over 30,000 recipients will receive Budi Individu and Budi Agri-Komoditi payments worth RM200 into their bank accounts on June 10,” Amir said via a statement.

Of course, the bigger question is how this will play out beyond the fuel equation, given the magnitude of price increases that will inevitably occur, but the effects will be seen soon. Mind you, we haven’t even adjusted the gas yet. Share your thoughts on this with us in the comments section.

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