FUEL SUBSIDY REFORM IS DIFFICULT

Removing subsidies for ultra-wealthy families at boarding schools is technically simple, although a tiered fee structure is arguably more reasonable than a binary system of no subsidy for T15 and subsidy for the rest. The Department of Education could obtain family income data and charge annual or semi-annual fees accordingly.

Gasoline, on the other hand, is constantly consumed at gas stations across the country. Malaysia has increased the price by 97 RON since May 2018, but T15 car owners cannot be forced to use the premium gasoline; they can freely consume 95 RON subsidized.

Fuel subsidy reform is difficult. Anwar’s Madani government said gasoline was the next step in its subsidy rationalization, after raising electricity tariffs in January 2023 and reducing diesel subsidies for private non-commercial vehicles in June 2024.

The 2025 budget stayed away from a general reform, instead proposing to maintain the subsidy for the vast majority while removing it for Q15.

The emergence of this T15 label was accompanied by few details. This has sparked debate over the income level that defines the ultra-rich. The Department of Statistics’ 2022 Household Income Survey sets the threshold at around RM13,000 per month, but the government may be inclined to set a higher figure.

This plan to impose differential gasoline prices, however, raises more fundamental questions.

First, Malaysia should not lose sight of the underlying sustainability and climate crisis mitigation objectives of rationalizing fuel subsidies. Cheap fuel leads to higher greenhouse gas emissions; Higher prices pose an economic and political challenge but must continually constitute a sustainable development objective.

Second, the application of differential gasoline prices at the pump faces serious obstacles due to the volume and generality of the subsidies.

While the diesel subsidy applies to commercial vehicles equipped with a fleet card, the proposed gasoline subsidy will apply to the vast majority, possibly requiring MyKad ID cards to be scanned at the pump to know income status. Besides the technical complications, the mechanism can be easily played by borrowing MyKads.