HOW do we define who is rich and therefore not entitled to fuel subsidies, and vice versa? No matter where we draw the line, there will always be a drastic cutoff between the highest earner who qualifies and the lowest earner who does not. This was one of the key criticisms when Prime Minister Anwar Ibrahim mentioned the T15 category. Whether it is the conventional T20, Anwar’s T15, or even if someone proposes T10, the same controversy will arise.
The current fuel subsidy plan, however, is similar to the personal income tax structure. It is good, simple, and effective in achieving its objective. The main rationale for avoiding blanket subsidies is not only to prevent non-Malaysians from benefiting, but also to stop the rich from enjoying them. Of course, whether foreigners should also be entitled to subsidies since they pay taxes in Malaysia is another long debate, which this article will not cover. Furthermore, there is little public demand or political will to extend the subsidy to foreigners for now.
The more complex issue is how to handle high-income earners. Under the previous proposal, those in the T15 category were not entitled to any subsidy. A common comparison was that it is unfair for the government to subsidise a small amount for the poor riding motorcycles, yet fork out a huge subsidy for the rich driving fuel-guzzling vehicles. In reality, however, income alone is not the most accurate measure of wealth. This is where the idea of PADU comes in, measuring purchasing power rather than just income.
The good points of the system
Under the current system, the government is not concerned about your income but rather about how much fuel you consume monthly. In other words, how much subsidy you should receive. This new structure ensures that those who consume RON95 petrol moderately will continue to enjoy the subsidy, just as under the previous blanket system. However, those who consume excessively must pay non-subsidised prices.
The key question is: where should the line be drawn? If the limit is set too low, it affects the middle-income group; if too high, the government ends up subsidising excessive users. The chosen limit of 300 litres means that anyone spending RM615 or less per month (at RM2.05 per litre) is unaffected. Government also claims that the data shows that 99% of users fall within this limit.
On the other hand. excessive users generally fall into two categories; the rich users because their luxury or high-engine-capacity vehicles consume more fuel, and the necessity users who consume more fuel not because of their car type but because of their needs, such as e-hailing drivers.
The former tends to complain less. While for the latter, the government has wisely exempted e-hailing drivers from the limit. However, at the same time, the government also should consider special cases based on a case-by-case basis, such as individuals who must travel long distances daily between home and work. This group is not expected to be large and would not complicate the workload and complexity too much.
Loopholes and solutions
First, it is the implementation risks. Government’s press statement mentioned the successful redemption of the RM100 MyKasih benefit using IC chips proves the IC is working well. This directly addresses public concerns and avoids public from massively changing their IC.
However, the unknown risk of another MyKasih-style glitch remains. This is something that the government must pay attention to it. If such failure reoccur again, it is not merely technical glitch but also damage the government’s credibility and public trust.
Second, is regarding the subsidy enjoyed by the ultra-rich. This loophole is not unique to Malaysia, but it happens globally. Ideally, a good public policy should target only the intended groups without leakage. However, in practice, some leakages are inevitable.
The key question is whether the leakage is severe enough to warrant government intervention, or whether it is more reasonable to accept it. Chasing a completely airtight policy in fact may cause more administrative costs than the leakage itself. In this light, allowing the ultra-rich to also enjoy the 300-litre subsidy is acceptable. Whether framed as a privilege for all Malaysians regardless of wealth, or justified as cost-effective tolerance of minor leakages, the outcome is still rational.
Conclusion
So far, this policy appears to be working well. In terms of coverage, eligibility is broad enough to cover most users, with exemptions clearly anticipated in advance rather than leaving the framework incomplete. In terms of technical preparedness, by testing IC chips through the MyKasih RM100 grocery programme and staggering usage by categories of users, the government addressed potential glitches and avoided overwhelming the system.
Even if problems occurred, fewer people would be affected. At the same time, the government has indirectly introduced policy priorities just like many countries, whether is intentionally or coincidentally, for the military and police force. This is as a form of recognition of their contributions.
Most importantly, this system seems to be user-friendly for the moment while still enabling the government to achieve its intended objectives at the first stage.
Dr. Lau Zhe Wei
Assistant Professor
Department of Political Science
International Islamic University Malaysia
