Further fuel and sugar price hikes from tomorrow

Petrol, diesel and LPG will cost more from tomorrow. — Reuters pic

PUTRAJAYA, Dec 3 — The price of fuel and sugar will go up from midnight tonight as part of the Najib administration’s ongoing drive to reduce subsidies, but it is fraught with political risks as he mulls early elections next year.

The price of RON95 will increase by five sen to RM1.90 per litre, diesel by five sen per litre to RM1.80 and liquefied petroleum gas (LPG) by five sen to RM1.90 per kg. Sugar will also cost 20 sen more at RM2.10 per kg.

Through these price hikes, the government expects to save subsidy payments of RM621.9 million on RON95, RM213.2 million on diesel, RM63.5 million on LPG and RM283.5 million on sugar a year, or a total of RM1.18 billion annually.

RON97 will remain on a managed float based on market prices.

This is the second wave of subsidy cuts following the first round of hikes on July 16, when prices went up by five sen per litre for petrol and diesel, 10 sen per kg for LPG and 20 sen per kg for sugar.

Performance Management and Delivery Unit (Pemandu) CEO Datuk Seri Idris Jala said today subsidy rationalisation was needed to bring down government expenditure.

“We are... doing this to make sure that our deficit is reduced. We are a responsible government. We will make sure that we will live within our means,” he said at a media briefing on the latest subsidy cuts.

Also present was Domestic Trade, Co-operatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob.

“One of the measures to reduce cost is to rationalise our subsidies because Malaysia’s total subsidies are higher than many other countries. Our subsidies are also not targeted at the poor. There’s quite a lot of leakages and abuses.”

The savings will be used to fund rural development, education, urban transport and other areas under the Government Transformation Programme (GTP), he added.

Idris stressed, however, that prices for fuel and sugar in Malaysia will remain one of the lowest in the region even after the subsidy cuts take place.

“Even after we have put this five-sen increase... our selling price for RON95, and also LPG and diesel and sugar, is still lower than Indonesia, lower than Singapore and lower than Thailand,” he said.

The minister in the Prime Minister’s Department was heartened by fair public reception to the last round of subsidy cuts, which he attributed to the government’s success in keeping inflation under three per cent.

“The CPI (consumer price index) increase was very, very small and that is why, when we did this, it was well taken by the public and the public didn’t really feel financially disadvantaged,” he said.

“We are controlling inflation in this country despite the first wave of increases. Because it’s very small increase, we are still able to contain everything so that does not put any burden onto the people.”

Idris said the government would take into account public feedback and the strength of the economy before deciding on when to make further moves to cut subsidies.

He added that renegotiation of independent power producers’ (IPPs) contracts was ongoing but declined to comment on the status.