October 31st, 2008 by Hafiz Noor Shams
According to Bernama:
KUALA LUMPUR, Oct 31 (Bernama) — Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad today suggested the government removed the 30 sen subsidy on fuel prices if the pump price goes below RM1.92 a litre. [Govt Should Remove 30 Sen Subsidy On Fuel Prices, Says Shahrir. Bernama. October 31 2008]
Four days ago, I suggested a similar move with the similar mechanism, i.e. removal of subsidy when the market prices fall below the current subsidized retail prices. I shamelessly quote myself:
With global crude oil prices having more than halved since it peaked at about USD150 per barrel just months ago, this is definitely one of those rare opportunities to make a permanent structural change to our economy by effectively eliminating the fuel subsidy for once and for all.
With decreasing subsidy quantum, the government could just maintain the current prices until the quantum of subsidy becomes zero. This happens when market prices equalize with the current subsidized prices. In doing so, elimination of subsidy does not require a hike in retail prices. When that happens, the government could immediately float it.
This strategy significantly reduces political opposition to the idea of subsidy removal. I suspect what was protested in the past was prices hike, not subsidy removal per se. [Of the best time to kill off the fuel subsidy. The __earthinc October 27 2008]
I also wrote in the same entry:
Unfortunately, there is little chance for this little maneuvering to see daylight. The government has already hinted for further reduction of RM0.15 by the end of this month. [Of the best time to kill off the fuel subsidy. The __earthinc October 27 2008]
I would like to take that back. There is a chance after all if the dear Minister pursues the matter with tack.