Fuel hike is justified

The increase is a proactive step for fiscal consolidation and economic survival.

Athi Shankar, FMT

A NGO has argued that the fuel price hike of RM 0.20 for RON95 petrol and diesel was to save the country’s economy.

Sensible and Ethical Malaysians United Team (Semut) president Huan Cheng Guan attributed the fuel price hike partly on the current Syrian conflict, stressing that global oil price can reach US$150 per barrel now.

He also pointed out that Malaysia was officially not an oil exporting country as 90% of its production was for domestic use.

He argued that the fuel price hike was the government’s proactive step for fiscal consolidation to increase market confidence, once fiscal deficit had been reduced.

“It’s not political issue but about Malaysia’s economic status and survival,” said Huan in a statement here today.

He claimed that the Putrajaya administration had to cut subsidies and increase fuel price to avoid the country from being punished by international rating agencies and foreign investors for failing to tackle structural problems, such as high rate of subsidies.

The federal government has allocated RM24.8 billion this year on fuel subsidies and the Prime Minister Najib Abdul Razak has announced that the country would save RM1.1 billion until end of the year with the recent hike

The government would save up to RM3.3 billion per annum while it still subsidises 63 sen per liter for RON95 petrol and 80 sen per liter for diesel.

The government’s target is to reduce Malaysian’s fiscal deficit to 3% by 2015.

Huan pointed out that the petrol subsidies were meant for the poor and low-income group, citing the government’s plan to increase its BR1M budget next year. This year’s budget was RM2.9 billion.

He said government had subsidised between RM25 billion and RM30 billion to allow Malaysians and foreigners to enjoy cheaper fuel, gas, and water.

But, he said such subsidies to lower prices of goods and services were also enjoyed by undeserving rich Malaysians and foreigners.

He also claimed that the main beneficiaries of subsidised diesel were owners of Vietnamese and Thai fishing vessels, and the Malaysian fishermen who sell their subsidised allocation to them.

He said the subsidy reduction was also to discourage smugglers from Thailand and Indonesia.

“Hence reducing subsidy is a vital move in the right direction to arrest the leakages from country’s income.

“If the government did not take this move, the other alternative would be to increase taxes,” said Huan.