Fuel, sugar prices up as subsidy cuts start

By The Malaysian Insider

KUALA LUMPUR, July 15 — The Najib administration will begin cutting subsidies tomorrow by raising the prices of petrol, diesel, natural gas and sugar in a move which could see the ruling Barisan Nasional (BN) coalition vulnerable to political challenges and risks.

The government announced tonight that RON95 petrol and diesel prices will go up by five sen a litre. Tomorrow’s pump price will be RM1.85 per litre for RON95 and RM1.75 per litre for diesel. Subsidies for RON97 have been removed completely and its price will be subject to market forces.

Natural gas (LPG) will rise by 10 sen per kilogramme to RM1.85.

The price of sugar will also be increased, by 25 sen per kilogramme to RM1.75.

In a statement tonight, Prime Minister Datuk Seri Najib Razak said the move to cut subsidies on fuel and sugar would save the government RM750 million a year.

“The readjustment of fuel and sugar prices are minimal compared to the proposals submitted because the government wants to balance between maintaining the people’s interests and the need to manage the country’s deficit,” he said.

The Malaysian Insider understands that this is the first stage of subsidy cuts and it is expected to be reviewed every six months.

Sources said that subsidies on electricity are also expected to be cut but no decision has been made yet on when that will happen.

By raising prices of fuel and sugar, Prime Minister Datuk Seri Najib Razak is signalling he is prepared to rebuild support for BN and implement economic reforms which could include the eventual introduction of an unpopular Goods and Services Tax (GST) and further market liberalisation.

The government’s reluctance to upset voters had led to reversal of government decisions and reform pullbacks that fuelled talk Najib was readying for a snap election.

Najib’s government was forced to reverse a decision recently to issue a gambling licence to quell mounting public anger.

This came after the GST was called off in February together with a scheduled fuel price hike in May.

The decision to begin spending cuts also suggests Najib has accepted the arguments of Datuk Seri Idris Jala.

Jala, the minister in the prime minister’s department, had controversially predicted Malaysia could be bankrupt by 2019 if it did not begin to cut subsidies for petrol, electricity, food and other staples, which he said cost the country RM74 billion last year.