When leaders are under siege and the political scenario they operate in is in a state of turmoil, there is a tendency for them to make the wrong decision. The recent decision by our government to increase the price of petrol and diesel signifies such a case.
The flawed decision of granting a subsidy scheme for petrol and diesel in the beginning was a bad decision. The decision to increase the price now was made too late and was long overdue. Basic economic principles dictate that market forces should be allowed to determine supply and demand and hence, the price will prevail at the point where demand equals supply.
Any attempt to manipulate the price by means of a subsidy will create an artificial demand and supply situation. A subsidy will inevitably create a black market situation and encourage the smuggling of the goods for pecuniary gains.
In this case, a subsidy depresses the price of the goods vis-a-vis the market price and unscrupulous people will capitalise on the situation by selling the subsidised goods to neighbouring countries where it is sold at market price.
Such a scenario is displayed along the coastal boundaries of Kelantan, Kedah, Selangor and Malacca where fishermen under their legitimate guise of fishing, transfer their load of subsidised diesel to waiting foreign vessels for a quick monetary profit.
Two thousand litres of diesel at a paltry profit of 50 sen per litre is sufficient to net RM1,000 for a day's work. No wonder empty fishing vessels returning home without any fruitful catch are a common occurrence.
Common sense dictates that if fishermen need a subsidy to continue with their profession, then it’s about time they abandon fishing and seek new pastures in other ventures that are more lucrative. If Thailand and Indonesian fishermen can fish and sustain their venture profitably without any subsidy then why can’t our fishermen do the same?
Giving them a subsidy to continue in a non-profitable venture is not a viable option in the long run. It would be better for the government to encourage them to venture into something else without the dependency of a subsidy.
In the case for increasing the price of petrol and diesel, the government at first made the right decision to ban the sale petrol and diesel to foreign vehicles for a 50km radius from the border towns.
This option was sensible and most practical since it immediately cease to subsidise the sale of petrol and diesel to foreigners who were capitalising on the difference in the pump price between the two neighbouring countries.
In Thailand. the pump price of petrol is RM4 per litre and at the border town of Rantau Panjang the pump price is RM2.70 per litre. With the unending daily queue of foreign cars lining up to fill up their cars, a modest estimate of one million litres of subsidised diesel sold could translate into a RM1.3 million loss of daily revenue.
In a year, the government will be subsidising an astronomical amount of RM468 million - and that is just for only one border town. How much is lost in total from all other border towns is anybody’s guess.
The question that begs to be answered is why are we selling subsidised petrol and diesel to foreigners? The fact that subsidised petrol and diesel are not reaching the targeted group should be good reason enough to stop the sale of petrol and diesel to foreigners at border towns.
Why the flip flop decision to lift the ban of sale to foreigners?
The lack of a proper policy to address this serious leakage of our country's finance is a mismanagement of our country's resources. Previously when the pump price was subsidised at RM1.92 per litre, our country must have lost billions. Can the policy makers please tell us why we are not addressing this serious financial leakage?
