KUALA LUMPUR: Details of the government's targeted fuel subsidy initiative are in the process of being worked out but the implementation mechanism is widely speculated to be tied in to the individual's MyKad (identification card).
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said in order to manage the provision of the fuel subsidy, several things have to be looked into in detail, especially the mechanism to be used to grant the subsidy.
He said in its 2018 General Election manifesto, Pakatan Harapan promised to provide oil subsidies, with the MyKad used as a mechanism to distribute the subsidies to the targeted groups.
He said using the MyKad for this purpose would be a good move because academic studies have shown that the use of MyKad (which was implemented in 2011) has yet to reach its full potential.
"Hence, there has to be a clear mechanism... for example, petrol stations can make use of a certain device to enable them to detect the income levels of their customers and their eligibility for the subsidy," he said.
The targeted fuel subsidy, set to be implemented in the second quarter of 2019, is among the measures outlined in Budget 2019 to ease the cost of living for the bottom 40 percent of households (B40) whose total monthly income fall below RM3,860.
Food stamps
Mohd Afzanizam also said that in developing the fuel subsidy mechanism, attention should be paid to the access factor, especially in rural areas, so that the subsidy reaches the targeted groups.
"This is important because we don't want the fuel subsidy to go to people who don't qualify for it, for example, tourists who drive to interior regions or kampungs."
The targeted petrol subsidy is meant for owners of 1,500cc cars and 125cc motorcycles. The government will provide a petrol subsidy of 30 sen a litre for RON95 but it is limited to 100 litres a month for cars and for motorcycles, 40 litres a month.
Other measures announced in Budget 2019 to relieve the financial burden of the B40 households are Cost of Living Aid or Bantuan Sara Hidup (BSH) of RM500 to RM1,000 for households earning between RM2,000 and RM4,000 a month; an increase in the household electricity subsidy from RM20 and below to RM40 and below; and a RM100 30-day unlimited Rapid bus and rail pass effective Jan 1 next year.
Mohd Afzanizam also said that the government should extend its subsidy programme to other essentials like food.
"Perhaps, it can introduce food stamps to ensure that B40 households get to buy nutritious food at subsidised rates.
"For this, the MyKad can be used to ensure that the aid only goes to those who are eligible," he added.
Targeted subsidies necessary
In theory, subsidies can bring about inefficiencies in the market. But in reality and in the context of the role of government intervention, subsidies are needed to lend a helping hand to needy groups.
Universiti Kebangsaan Malaysia's Centre for Sustainable and Inclusive Development (in the Faculty of Economics and Management) chairman Associate Prof Dr Mohd Azlan Shah Zaidi said basically, targeted subsidies were more effective as only deserving individuals would benefit from them. However, the question that arises is its implementation.
He said the Domestic Trade and Consumer Affairs Ministry must come up with an effective mechanism to ensure the successful implementation of the subsidy programme.
"There should be no leakages," he said, adding that a few things have to be looked into when implementing targeted subsidy.
"First, the implementation should not involve high costs, that is the cost spent on preparing the card, coupon or other mechanisms to get the subsidy going."
Second, it should not disrupt the efficiency of the existing market transactions, Third, the government should ensure that nobody makes huge profits by manipulating the market following the implementation of the subsidy.
Mohd Azlan also urged the government to identify the individuals who were eligible for the petrol subsidy, as well as check with the Road Transport Department.
He also suggested crediting the petrol subsidy into the recipient's bank account as follows: RM360 (100 litres x RM0.30 x 12 months) for car owners and RM144 (40 litres x RM0.30 x 12 months) for motorcycle owners.
"If there are four million cars and 2.6 million motorcycles (eligible for the targeted fuel subsidy), the government will spend only RM1.81 billion, which is lower than the RM2 billion allocated for this subsidy (in Budget 2019)," he added.
Reduce transport costs
Meanwhile, clinic assistant Mazlah Nordin, 52, is looking forward to the petrol subsidy as it would reduce the transport costs of people like her who use motorcycles as their mode of transportation.
"My family can survive on the salary we earn now but we live in moderation. Once the petrol subsidy is implemented, I hope to reduce my transport costs and use the savings from there for other necessities," said the mother-of-two.
Mazlah, whose children are studying at institutes of higher education, said she also took orders for 'kuih-muih' to earn some extra money and meet the family's daily expenditure.
Hasbullah Hasim, 37, who runs a grocery shop, is also happy with the fuel subsidy, pointing out that most owners of cars of 1,500cc and below and motorcycles of 125cc and below belonged to the B40 group who lived in the urban areas.
"However, we don't know how it will be implemented. I hope it will be implemented efficiently so that there will be no issue of it going to people who don't deserve it," he said.
