Government think tank proposes fuel hikes – 15 sen this year and RON95 to cost RM2.60 by 2015

MAY 27, 2010 AT 4:47 PM BY PAUL TAN FILED UNDER MALAYSIAN FUEL PRICES

PEMANDU, a government think tank led by Minister in Prime Minister’s Department Idris Jala tasked with formulating proposals to reduce the country’s government subsidy budget has recommended a petrol price hike of 15 sen for RON95 and 10 sen for diesel.

This is the petrol price hike schedule which we’ll be looking at, based on a crude oil forecast of US$73.06 per barrel in 2011 and the region of between US$79.41 to US$94.52 per barrel between 2013 and 2015.

• Current 2010 Price – RM1.80 per liter RON95
• Q3/Q4 2010 Price Hike – RM1.95 per liter RON95
• 2011 Price Hike – RM2.16 per liter RON95 (broken into 2 hikes, once per 6 months)
• 2012 Price Hike – RM2.20 per liter RON95
• 2013 Price Hike – RM2.34 per liter RON95
• 2014 Price Hike – RM2.52 per liter RON95
• 2015 Price Hike – RM2.60 per liter RON95

These are just the proposed hikes for RON95. RON97 was not mentioned in the recommendations, which indicates that the government is further decreasing priority on RON97 subsidies. We could see a price of way over RM3 per liter for RON97 by 2015.

Not only that, the proposal recommends that the government renegotiate the PLUS toll concession contract this year and the LDP contract by 2013, then all toll concession agreements must proceed without any subsidies, resulting in a toll hike of between 10% to 67% depending on the highway, distance, etc from this year onwards.

For those dreaming of a future of driving electric cars, electricity tariffs are to be untouched for those using less than 200 kWh for this year. However gas prices are proposed to be increased by RM3/MMBTU every 6 months, which will translate to an electricity increased of 1.6 sen/kWh every 6 months. If we take the Nissan Leaf’s 24kWh battery as an example, that’s a RM0.38 hike per full charge for the Nissan Leaf every 6 months. LPG, which is priced at RM24.50 has been proposed to be hiked to RM27 with a 20% price increase every year.

The proposal also spells out a “mitigation plan” which involves giving cash rebates of 126 ringgit for owners of cars with engines smaller than 1,000cc in capacity, and 54 ringgit for owners of small motorcycles. My reference source doesn’t mention of this is one time, monthly, or yearly. There is also a proposal for a 20% discount on toll charges for frequent users and a cash rebate of RM20 for anyone with a Malaysian IC – not sure what this cash rebate is for but I’m assuming it’s for fuel?

According to PEMANDU this will save the government about 3 billion ringgit this year, 14 billion ringgit next year, 21 billion ringgit in 2012, 29.5 billion ringgit in 2013 and 35 billion ringgit in 2014. These plans are yet to be approved by the government.

http://paultan.org/2010/05/27/government-think-tank-proposes-fuel-hikes-15-sen-this-year-and-ron95-to-cost-rm2-60-by-2015/

First round of cuts

PETALING JAYA: The Government has begun its first round of a gradual subsidy rationalisation programme, promising it would have minimal impact on families.

Describing the cuts as part of a “difficult but bold” decision to reduce fiscal deficit, the Government said it would still have to spend an estimated RM7.8bil on fuel and sugar subsidies this year.

Thus, effective today, prices of petrol, diesel, liquefied petroleum gas (LPG) and sugar have increased following a reduction of the subsidy.

Sugar is revised to an additional 25 sen per kg to RM1.90. LPG is up 10 sen per kg to RM1.85.

Petrol RON 95, RON 97 and diesel have gone up by five sen per liter. For RON 97, the Government has decided to withdraw the subsidy later and subject it to a managed float, where the price will be determined by an automatic pricing mechanism.

“This subsidy rationalisation will, according to estimates, allow Malaysia to reduce Government expenditure by more than RM750mil this year,” a statement from the Prime Minister’s Office said yesterday.

Details of the changes are available on the websites of the Prime Minister’s Office and Pemandu.

The Government also said the “long-needed” economic reforms would help Malaysia maintain the strong growth it had achieved to become a developed and high-income nation.

“We have begun a planned and fair reform of a subsidy regime that for too long has been ineffective in helping those who need it most and, over time, has become a barrier to Malaysia’s progress,” the statement read.

The prices of fuel and sugar in Malaysia would still be among the lowest in the region, it said.

It also said the Government made the decision about the subsidies following robust consultations with the people, citing the thousands of Malaysians who took part in policy labs and Open Day.

“As with subsidy reform, the Budget, the Government Transformation Programme and the National Key Economic Areas, the Government has made a determined effort to engage the public, listen and learn, and then act in the best interest of the nation,” it said.

Although Malaysia had weathered the global recession well, the Government said the country could not achieve its ambition to be a high-income nation by simply managing through a crisis.

“As the Government has consistently said over recent months, we must also implement subsidy reforms that will remove distortions in the marketplace and enable us to better target our resources on those most in need, and on investments that will provide lasting benefits for Malaysians.”

It assured that the savings from the reforms would allow for resources to be better channelled for families, communities and business growth.

“Measures such as the 1Malaysia clinics, the 1Malaysia mobile clinics, as well as the scholarships for all 9A+ and deserving students – specifically those who have done well, but come from lower income families – are made possible by such reforms,” it said.

There were three main concerns which led to the subsidy rationalisation: wrong beneficiaries, wastage and abuse.

The Government also said that businesses used twice as much subsidised sugar than households, while owners of luxury cars enjoyed cheap fuel although they could afford unsubsidised prices.

http://thestar.com.my/news/story.asp?file=/2010/7/16/nation/6678655&sec=nation