CIMB forecasts mid-June kickoff for fuel subsidy rationalisation

KUALA LUMPUR: CIMB Treasury and Markets Research says the rollout of fuel subsidy rationalisation will start in mid-June 2024 at the earliest.

This projection aligns with the government's recent indication that the rationalisation will begin with diesel, it said in a note today.

"The implementation date was not stated, though we understand that registrations for the diesel fleet card system are due to be in the next month, putting June as the earliest start date.

"Considering the application process for the fleet card, we expect the rollout to take place in mid-June at the earliest," it said.

Prime Minister Datuk Seri Anwar Ibrahim, in a national address last night, announced the Cabinet's decision to initiate fuel subsidy rationalisation, starting with diesel.

However, specific timelines have not been disclosed, pending announcements from the relevant ministries.

To recap, Domestic Trade and Cost of Living (KPDN) Minister Datuk Armizan Mohd Ali stated in February plans to implement targeted diesel subsidies by June 2024.

The expected savings from diesel subsidies are estimated at RM4 billion, equivalent to 0.2 per cent of gross domestic product (GDP) per annum.

CIMB outlined the two application levels under the subsidised diesel control system (SKDS) 2.0.

These include an application to KPDN for authorisation, with approvals taking up to two days, and an application to oil companies for fleet card issuance, estimated to require up to four weeks.

The SKDS 2.0 application process for companies operating nine types of goods transport vehicles commenced on March 7 and has since expanded to an additional 14 types of commercial vehicles as of May 13.

"At this stage, it remains unclear whether eligible individuals owning diesel-powered vehicles will need to apply for cash aids, or if the government will utilise information from the PADU database," the note added.

The National Utility Database, or PADU, serves as a computerised repository for storing and managing information on utilities and related details.
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