KUALA LUMPUR: Subsidies may soon be reduced across the board over five years, a move which Datuk Seri Idris Jala described as “the most unpopular decision that the government has to make since independence”.
The minister in the Prime Minister’s Department said it is aimed at saving up to RM103 billion during the period to partially repay the nation’s huge debt and address the fiscal deficit.
The government now spends RM74 billion a year to subsidise various economic and social sectors. It currently owes various parties a total of RM362 billion while the fiscal deficit stands at RM47 billion.
Idris, who is also the chief executive officer of the Per formance Management and Delivery Unit (Pemandu), said this in his presentation on the country’s proposed five-year subsidy rationalisation roadmap at the Subsidy Rationalisation Lab Open Day here yesterday.
The lab was held to get suggestions and feedback from the public on the government’s plan to gradually scrap the subsidies.
Prime Minister Datuk Seri Najib Razak said the gov ernment would wait for the response and feedback from the people before making any decision on the subsidy ra tionalisation roadmap.
Speaking after chairing the Umno supreme council meeting at the Putra World Trade Centre, Najib said, however, while the government leaves it to the people to decide whether the subsidies should be maintained or abolished, they should bear in mind and fully understand the con sequences of their decision.
“Based on their feedback, we can make a conclusion. What is important is the well being of the people.
“This is a big issue and that is why we want to share it with the people so that they will have a better understanding and realise the implications.”
The RM74 billion subsidy bill consists of four components. They are social, which includes healthcare and education (RM42.8 billion), fuel (RM23.5 billion), infrastructure (RM4.6 billion) and food (RM3.1 billion).
The reforms recommended will be done by gradually cutting subsidies for fuel, electricity and toll, as well as other staples like sugar, cooking oil and flour.
There will be cash rebates in certain sectors as the government gives back some of the savings to the public.
“Subsidies are an inaccurate representation of trade. They pose a fiscal burden that emerging countries such as Malaysia should move away from. As such, we desperately need an exit strategy for subsidies as they are unsustainable,” Idris said,
He, however, gave an assurance that subsidies on education, healthcare, agriculture and fisheries would remain but would be done more efficiently to curb wastage and abuse.
The proposals must first get the cabinet’s approval and Idris plans to submit a detailed report with public feedback next week.
Under the proposals, the price of petrol and diesel will initially be raised by 15 sen per litre and 10 sen per litre respectively.
Subsequently, petrol and diesel will cost an other 10 sen more every six months.
Idris said the cost of continuously subsidising fuel would be astronomical, about RM200 billion in the next 20 years.
The price of LPG (liquefied petroleum gas) would initially be increased 10 per cent before rising by 20 per cent every six months.
The government stands to save RM44.9 billion over five years from the move.
The public burden from the increase in fuel prices will be partially offset by a cash rebate for car and motorcycle owners.
Owners of motorcycle below 250cc will get a RM54 rebate per person, while those with cars less than 1,000cc will get RM126.
Price of sugar and flour will each increase 20 sen per kg for a start. Subsequently, sugar will cost 20 sen more every six months until 2012, while flour will add another 25 sen next year.
Cooking oil will increase by 15 per cent initially, before rising another 15 per cent in 2011 and five per cent in subsequent years until January 2014. The government will save RM3.7 billion in five years from the move.
Gas price for power and non-power sectors and electricity tariff will also be increased on a staggered basis.
Electricity tariff will initially be raised by 2.4 sen per kWh (per kilowatt hour), before increasing by 1.6 per kWh sen every six months.
Gas price for the power sector will cost RM4.65 per MMBTU more than the current subsidised price of RM10.70 per MMBTU, before rising by RM3 every six months.
Gas price for the non-power sector will rise RM2.52 per MMBTU before a hike of RM3 per MMBTU every six months.
Idris said the electricity tariff hike will not impact 56 per cent of consumers, who use less than 200 kWh every month or RM20 a month.
The government, in turn, will save RM35.9 billion over five years from the reduction in gas and electricity subsidy.
Toll rates will be increased as per the concession agreement, but the government will provide cash rebates in return.
It will be in the form of a 20 per cent discount on the next reload for Touch ‘n Go users with at least 80 transactions a month.
sumber : News Straits Times