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.

5 Responses to “[1821] Of Minister Shahrir suggested elimination of fuel subsidy”

  1. on 01 Nov 2008 at 00:21 khensthoth

    I remain unconvinced. The minister suggested that the government removed the subsidy if the price falls below RM1.92. What happens if the oil price increase again? The subsidy scheme is put into place again?

    RM20 billion has been spent this year on subsidy. Imagine that kind of money being used to improve public transportation, or the general traffic condition.

    Months ago, several project in Penang are shelved in the Mid-Term review of the 9th Malaysia Plan. The lack of fund was one of the reasons quoted. Penang NEEDS a viable public transportation system (in addition to the RapidPenang).

  2. on 01 Nov 2008 at 00:36 moo_t

    I am not convinced.

    Removing the fuel subsidies are simple to talk than done. IPP and diesels for various industry are also under the subsidies scheme. And I see no solid plan and fact that the government will remove of fuel subsidies.

  3. on 01 Nov 2008 at 00:57 hyperX

    Well, I’m still waiting my Rm1.50 per litre petrol, is it going to happen? Anyway, Rm2.15 is all right for me, the government should start forcing manufacturers to reduce their products price.

  4. on 02 Nov 2008 at 02:47 Hafiz Noor Shams

    Your RM1.50? Well, don’t use my money please. Please pay for yourself.

  5. on 03 Nov 2008 at 22:48 Samuel Sing

    Subsidies are bad in the long run. There should be a cap on subsidies. It should reflect propotionately to the price of crude oil price. Committment to gradually move away from subsidy involves preparing the general public & business using a realistic time scale schedule is better.
    Unfortunately, Malaysians in general are too ingrained in subsidy mentality & think it’s a duty of government to support subsidies.Rather Tax Reforms, Wage/Employement Reforms, VAT implementation, Reducing Budget Deficit are critical issues which needs greater attention.

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