Government to spend additional RM4.22 billion in fuel subsidies this year due to increase in global oil prices

The government says an additional RM4.22 billion is expected to be spent this year on fuel subsidies as a result of the increase in global oil prices, The Malay Mail reports. The amount will be used to maintain the ceiling prices that have been set for RON 95 petrol, diesel, liquefied petroleum gas (LPG) as well as cooking oil, said finance minister Datuk Seri Tengku Zafrul Abdul Aziz.

Currently, RON 95 has a capped price of RM2.05 a litre, while that for diesel is RM2.15 per litre, the ceiling prices for both having been revised on February 10 this year. As for LPG, its price of RM1.90 per kg has been in place since June 2015, while that for cooking oil (RM2.50 per 1kg pack) remains from that set in 1997.

In a statement issued yesterday, he said that the government remains committed to maintaining these ceiling prices. “The government is prepared to bear this increased subsidy expenditure to maintain the welfare of the people and the continuity of businesses, especially small business traders,” he said.

“A total of RM3.78 billion has been allocated for the year 2021 but based on the current global market prices, the government is expected to accommodate subsidies of up to RM8 billion, which is RM4.22 billion higher than the original allocation,” he added.

In 2019, the government spent RM6.32 billion in subsidies, but this dropped to RM2.16 billion last year. The reduced spending was due to global crude oil prices falling significantly as a result of an “oil war” among oil-producing countries, which saw the barrel price dropping below US$20 at one point in April last year.

Pump prices also fell to RM1.25 a litre for RON 95 and RM1.46 for diesel that month, and the lack of fuel consumption last year also had plenty to do with reducing subsidies.

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