E-wallets, direct transfers, among ways to funnel funds

PETALING JAYA: Transferring aid through e-wallets are among the methods being considered by the government in its plan to restructure RON95 fuel subsidies in the middle of the year.

Sources also said the government is also considering channel­ling funds to targeted groups through their bank accounts, a practice which is currently in place for other schemes such as Skim Tunai Rahmah (Rahmah Cash Aid).

Another method is the use of fleet cards for small businesses and entrepreneurs that rely on RON95 petrol, one source said, similar to what is being used for subsidised diesel.

Under the plan, fuel subsidies which have been used to cap RON95 petrol prices at RM2.05 per litre at the pump will be removed and channelled to targeted households and motorists.

Last week, Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali had said that the government is in the final phases of designing the mechanism. He assured the public that the system to determine who is eligible to receive the subsidies will be fair and effective.

Experts such as economist Dr Yeah Kim Leng said direct cash transfers have been the most effective means of channelling government aid to targeted groups.

“This is the experience in Malaysia and globally, because the aid reaches them directly at minimal cost to the government,” said Yeah of Sunway University.

Other experts have proposed that subsidies for RON95 should be phased out gradually at the pump instead of a one-off, total stop like what happened with diesel.

Last year, diesel prices at the pump were allowed to float while subsidies were channelled to certain industries and businesses through a combination of fleet cards and cash transfers.

They also proposed that stamping out subsidised RON95 use among foreign-owned vehicles should be prioritised over cutting fuel subsidies for affluent Malay­sian motorists.

Lee Heng Guie of the Socio-Econo­mic Research Centre (SERC) said it is unlikely that the government will abruptly end all subsidies for RON95 and allow the fuel’s price to float.

“The government should also do pilot tests before the actual rollout in addition to opening up registration for Padu again,” said Lee, SERC’s executive director.

Padu is the government’s central database which is being used to collect information on the incomes of all households in order to effectively channel aid and subsidies, and to craft economic plans.

Yeah said the government must carefully weigh the pros and cons between a total end to subsidies and a gradual phase-out.

“The first option is where we bite the bullet and absorb the impact all at once and then we don’t have to deal it.

“A gradual rollback could see the fuel price increase in stages but the challenge is that businesses will also keep increasing prices every time we pull back subsidies.”

It will be hard to determine whether these gradual cost increases by businesses that accompany every cutback in subsidy is actually justified, said Yeah.

Economist Dr Barjoyai Bardai estimates that Malaysia can save about RM10bil in subsidies lost to foreign-owned vehicles who fill up on RON95 at petrol stations along the Singapore and Thai borders.

“But we must ensure that these petrol stations have enough unsubsidised fuel to sell to foreign cars.

“Malaysian vehicle owners will also have to swipe their MyKad before filling up,” said Barjoyai of the Malaysian University of Science and Technology.

He argued that the government should only start cutting subsidies for wealthy motorists once it has plugged the leaks of subsidised fuel at the border areas.

“The problem with cutting subsidies for the wealthy is that who is rich differs across regions. A person earning RM7,000 per month in Kelantan is wealthy but that threshold is low for someone living in Putrajaya.”