Diesel subsidy reform worth the political cost, says analyst

PETALING JAYA: The government had to implement its new Budi Diesel programme, despite its political cost, as any delay would only increase the government’s financial burden and leave the subsidy system open to further abuse, says a political analyst.

Reform of diesel subsidies was an unpopular but necessary move to curb leakages and safeguard domestic supply amid the global supply crisis, Azmi Hassan of Akademi Nusantara told FMT.

While subsidy reforms were often criticised as a reduction in government assistance, blanket subsidies were unsustainable as public funds continued to benefit ineligible parties, especially as global energy markets remain uncertain, he said.

“The government has borne the cost of leakages amounting to one billion litres of diesel a year in Borneo and the peninsula. Coupled with the uncertainty in the energy supply chain arising from developments in the Middle East, this has forced the government to act,” he said.

However, Putrajaya should focus on explaining its main objectives: to protect energy supplies, reduce leakages and improve the efficiency of public spending.

“The government needs to make clear that the diesel subsidy measure is being implemented because of energy supply concerns, and not merely for financial reasons,” he said.

Azmi said public acceptance would ultimately depend on how smoothly the policy was implemented. If implemented effectively, the subsidy reform could be viewed as a responsible measure to protect public finances and domestic supplies without withdrawing support from those who genuinely needed it.

From July 1, about 700,000 eligible private diesel vehicle owners will be able to buy up to 200 litres of subsidised diesel a month at RM2.10 a litre using their MyKad.

Eligible owners of pickup trucks and jeeps may apply for an additional 100 litres, while separate subsidy arrangements will remain for critical sectors, including fishermen, smallholders, public transport operators and commercial vehicles.