Government needs to increase RON95 petrol price by 32 sen/liter before July 1 to meet subsidy savings target
The rationalize fuel subsidies in Malaysia has begun by removing the general subsidy on diesel, with retail prices of B10 and B20 diesel on the peninsula has increased to RM3.35 per liter from today, June 10. This is an increase of RM1.20, or 56%, from last time RM2.15 per liter Fuel prices were limited from 2021 by the government.
Prime Minister Datuk Seri Anwar Ibrahim said that this was a painful move but necessary to save the countrybut the rationalization program will of course not stop there, as the government has made it clear that it has a plan Do the same with RON 95 gasolinealthough a timeframe on when it will be implemented has not yet been given.
The sooner this happens, the less price increases will be needed if the goal is to meet the savings target set for this year. Budget 2024, Maybank Investment Bank said. In a research note, chief economist Suhaimi Ilias said that the simulation shows what is needed to achieve the target, as well as Dai Cuong News report.
He said in Budget 2024, the government said it was targeting to save RM11.5 billion from subsidy spending this year. To date, the company has saved RM7.4 billion, including RM4 billion from adjustments made in electricity subsidy and RM1.2 billion from the removal of chicken subsidies.
He added that a further RM2.2 billion reduction is expected from the targeted diesel subsidy, which is an amount pro-rated based on the RM4 billion savings that can be achieved from fuel rationalization throughout the year.
According to the investment bank, a 10 sen/litre increase in RON 95 petrol could save the government RM2.5 billion in subsidies over the entire year, assuming the increase is offset by commodity cash support months to eligible recipients under such targeted grants. for diesel engines.
Therefore, simulations conducted by the investment bank indicate that RON 95 petrol prices will need to increase by 32 sen, or 15.6%, to RM2.37/liter starting July 1 to reach get 4.1 RM. billion in savings needed to meet the RM11.5 billion target.
Suhaimi believes that if the government acts more slowly, done in the fourth quarter, RON 95 gasoline prices will have to increase higher to achieve the savings target by 2024, with a shorter time frame. He said that in such a scenario, fuel prices would have to increase by 65 sen, or 31.7%, to RM2.70 per liter if starting on October 1, 2024.
However, Suhaimi pointed out that any move to introduce targeted subsidies for RON 95 gasoline is ultimately a “political decision” and the government has the final say on the extent and timing Actual price adjustment point.
He added that the government could delay the implementation of the RON 95-related subsidy rationalization program this year and still achieve its savings target for the year. This is because the additional dividend from Petronas could cover any shortfall of the RM4.1 billion needed to achieve the total reduction target identified in the 2024 Budget.
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