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In a Bid to Curb Smuggling and Reduce Subsidies, Diesel Prices to Rise by 55%

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The new diesel price was announced as RM3.35 per litre, up from the previous subsidised price of RM2.15 per litre.

In a press conference today (June 9), Second Finance Minister Amir Hamzah Azizan announced a new diesel price of RM3.35 per litre, with effect from midnight (June 10). This price, reflecting market conditions without subsidies, is based on the May 2024 average using the automatic pricing mechanism formula.

The diesel price will be reviewed on a weekly basis.

Additionally, Amir revealed that 30,000 private diesel vehicle owners from the B40 category would receive RM200 under the Budi Madani subsidy programme starting June 10. This initiative aims to support lower-income vehicle owners amid the price adjustment.

“The government will closely monitor the situation to prevent price instability and expects to reduce leakage losses, currently amounting to RM4 billion per year,” Amir stated.

Second Finance Minister Amir Hamzah Azizan | Image Credit: NST

Despite the change on the Peninsula, the previous diesel price of RM2.15 per litre will remain unchanged for Sabah, Sarawak, and Labuan.

Amir emphasized that the targeted diesel subsidies are designed to curb smuggling and leakage, which have been significant issues. “Through these targeted subsidies, smuggling and misuse will no longer be lucrative. They will be drastically reduced,” he said.

According to finance ministry data, subsidised diesel consumption surged from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite the number of diesel vehicles not increasing significantly. Consequently, diesel subsidies soared from RM1.4 billion in 2019 to over RM14.3 billion in 2023.

“This indicates that the subsidies provided are ‘leaking’ and not benefitting the targeted groups,” Amir explained. The financial losses have impaired the government’s ability to safeguard the public’s interests.

Despite the price hike, Malaysia’s diesel price remains one of the lowest globally, and also regionally. In comparison, diesel costs RM4.00 per litre in Thailand, RM4.50 in Indonesia, and nearly RM9 in Singapore.

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