The Government spent over RM80 billion on subsidies, incentives and aid and this expenditure commitment exceeded the original estimate of Budget 2023 by RM64 billion.
Finance Minister II Datuk Seri Amir Hamzah Azizan, in the winding speech on the Supplementary Supply Bill (2023) 2024 today (Mar 19) in the Dewan Rakyat, said one of the main reasons for last year’s increase was to accommodate additional requirements for subsidies for petroleum products namely RON95 and diesel.
The level of consumption of petroleum products for year 2023 increased compared to 2022. For 2023, the total consumption of RON95 petrol is 17.6 billion litres, up from 16.1 billion litres in 2022.
Total diesel consumption also increased to 10.8 billion litres in 2023 compared to 8.4 billion litres in 2022.
“Uncertainty in world crude oil prices is also one of the reasons additional provision for subsidies is required. Average price of crude oil the world for the year 2023 is as much as 82.12 US dollars per barrel, which is more than 2023 Budget estimate of 80 US dollars per barrel,” he said.
These reasons are among those that require the Government to accommodate an additional commitment of 9 billion ringgit compared to the original estimate for subsidies petroleum products amounting to 25.6 billion ringgit.
The government reiterates its commitment to succeed in targeting measures re-subsidy. “Malaysia’s subsidy expenses can be said to be among the highest compared to any country in the world and it can no longer be financed sustainably. All citizens including the able-bodied and foreigners benefit from bulk subsidies. Subsidies cover basic goods such as petrol, cheap diesel, LPG and cooking oil in the local market as well causing leakages that harm the people’s money.
“As in Budget 2024, the Government will implement diesel subsidy targeting. With a subsidised diesel price of 2.15 ringgit per Litre compared to the market price of 3.43 ringgit per litre, our diesel is too cheap resulting in widespread smuggling activities.
“This is illustrated by sales of subsidised diesel which increased significantly from 6.1 billion litres in 2019 to 10.8 billion litres in 2023 which is a 70 percent increase; whereas the number of diesel vehicles only increased less than 3 percent and GDP increase around 20 percent,” the minister said.
Ministry of Domestic Trade and Cost of Living (KPDN) has launched OPS TIRIS to combat smuggling activities including diesel. As of March 18, more than 3 million litres of subsidised diesel have been confiscated. Enforcement continues to be increased especially in border areas.
For now, the subsidy retargeting proposal will be implemented in Peninsular Malaysia only. KPDN on March 6 has announced extension of the Diesel Subsidy Control System Pilot Project 2.0 (SKDS 2.0) to nine more types of goods vehicles and applications have been opened for benefits of more than 260 thousand vehicles.
The minister highlighted that as of March 18, 2024, a total of 7,155 goods companies with 41,781 diesel vehicles have registered in SKDS 2.0. Government calling for all vehicle owners who are eligible to be registered to when diesel subsidy targeting is implemented, the types of vehicles that qualify continue enjoy subsidized diesel.
The government also continues to examine the details of the data for ensure that all diesel vehicles deemed eligible to receive subsidies, are in SKDS 2.0 before the diesel subsidy retargeting was implemented.
