Subsidies for RON 95 petrol and diesel will be reduced by five sen a litre and LPG by 10 sen a kilogramme, said a statement from the Prime Minister's Office.
This means RON 95 grade petrol will cost RM1.85 a litre while LPG will be sold at RM1.85 per kilogramme.
"RON97 petrol will no longer be subsidised. It will be subjected to a managed float under which the price will be determined by the automatic pricing mechanism.
"For sugar, the upward price adjustment is 25 sen a kilogramme, it said.
The statement said the minimal changes would help Malaysia achieve a position of fiscal responsibility and "put us on a path towards reducing our deficit."
"To meet these objectives, we have chosen to make adjustments to our subsidies," it said.
Even after these changes, the Government will still spend an estimated RM7.82 billion on fuel and sugar subsidies this year.
Fuel and sugar prices in Malaysia will still be among the lowest in the region, it said.
It said the subsidy rationalisation will allow Malaysia to reduce Government expenditure by more than RM750 million this year.
The decision to reduce fuel and sugar subsidies was based on the fact that reducing fuel subsidies would have the greatest impact on Government spending and reducing sugar subsidies "will allow us to promote healthier lifestyles, it said.
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