There are two main reasons for Government’s decision to restructure oil subsidies. The first is to save subsidy cost which it claims to be unbearable. By reducing subsidies, the Government estimates to save 13 billion. However after discounting the costs of rebates to vehicle owners, which is 7 billion, the net saving is actually 7 billion. The second reason is to reduce distortion to the country’s economy. The Government also claims that the price increase is beyond their control. The Domestic Trade Minister, Datuk Sahrir Samad claimed that the Government has no resources nor capability to shield the countries economy from the effects of the global phenomenon. The Prime Minister stated that the Government would slash RM2 billion of its ministers’ entertainment allowances and reduce overseas holidays as well as delaying mega projects to save costs at the moment. The government also claimed to improve the public transportation system and extending the social safety net to cover more of the poor and disabled.
The Government provided explanation that the move to increase the fuel price in accordance with the global market price still makes Malaysia one of the countries with low prices for fuel in this region. The new prices of petrol and diesel are far lower than the RM5.20 and RM4.22 for the fuels, respectively, in Singapore which has floated the prices as well. However, to ease the burden of the rise in the fuel prices, Government will give cash rebate for Malaysian owners of private cars and motorcycles upon renewal of their road tax.
• RM625 per year for private cars of engine capacity of up to 2,000cc and pick-up trucks and jeeps of up to 2,500cc.
• RM150 per year for private motorcycles of engine capacity of up to 250cc.
For those who are not eligible for cash-rebate category would have their vehicle road tax reduced according to the following rate:
• Road tax reduced by RM200 for private petrol and diesel vehicles with engine capacity...