kpdn: targeted fuel subsidy could be based on vehicle horsepower

As global fuel prices, the Malaysian government is considering implementing targeted fuel subsidies that could be based on the vehicle’s horsepower. According to Bernama, Minister of Domestic Trade and Cost of Living, Datuk Seri Salahuddin Ayub said that the government can identify those who are eligible to receive subsidies based on the horsepower of their vehicle.

Fuel prices in Malaysia are already subsidized and the government spent RM 37.3 billion in 2022 alone for the fuel subsidy program, which is RM 5 billion more than it spent on healthcare. The targeted fuel subsidy aims to reduce this expenditure, whilst not burdening the masses.

On the targeted fuel subsidy program, Datuk Seri Salahuddin Ayub said, “So in terms of the data (targeted subsidy), it is almost complete for us to forward it to the Prime Minister (Datuk Seri Anwar Ibrahim) on how we can implement this targeted subsidy.”

The idea of targeted fuel subsidies sounds partially doable as the JPJ database, for example, can be used for RON95 petrol subsidies since the government can identify those who are eligible to receive subsidies based on the horsepower of the vehicle they own. The execution, however, may not be so smooth. Currently, even foreign vehicles sometimes get away with fueling up with our subsidized RON95 fuel.

As to whether the idea is a good one is debatable. However, we have seen a similar implementation of vehicle horsepower being used to determine the road tax for electric vehicles in Malaysia, albeit in the ‘kW’ unit. EV Road tax is now free until the end of 2025, but the default calculation is still based on power output/horsepower.

The Minister of Trade and Cost of Living adds, “The Prime Minister has given instructions for the matter (targeted subsidy mechanism) to be studied. But for the time being the government is still continuing the existing policy which is that we do not withdraw (subsidies) or increase any tariffs that we feel could burden the people. So the policy will continue until the Cabinet decides on that (targeted subsidy) later.”

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