LETTER | In the second half of 2025, the government plans to rationalise RON95 petrol subsidies by moving to a targeted two-tier pricing system.

Malaysians will have to swipe their MyKad at the pump to verify their eligibility for subsidised RON95 fuel, while those who are not eligible will pay the higher market price.

This plan aims to save costs for spending on brackets that don’t require much help.

As Prime Minister Anwar Ibrahim emphasised, only the wealthiest 10-15 percent of Malaysians (the T20 income group) are expected to pay market rates under the new system, with “85 percent of the rakyat” enjoying subsidised petrol.

Yet, many Malaysians recall that fuel price hikes, even targeted ones, are politically explosive.

This is especially true during these uncertain global economic conditions, with huge trade tensions and tariff wars; a delay is helpful, as it is the wrong time to roll back subsidies.

Consumer groups also worry about knock-on effects on food and transport costs.

The government also argues that nearly 40 percent of subsidised petrol is being misused by non-citizens, commercial vehicles and smugglers, and that this reform should be implemented immediately.

By eliminating this misuse, Malaysia could save up to RM8 billion a year, therefore, funds could instead go toward schools, hospitals or vital infrastructure (federal government expenditure, 2024).

The government has been test-running MyKad-based aid distribution in other domains.

Under Sumbangan Asas Rahmah (Sara) scheme, some 700,000 low-income Malaysians have been using MyKad to buy essential goods at over 3,500 shops, and this is now being expanded to 5.4 million recipients nationwide.

If millions can use MyKad for groceries, why not for petrol?

Promise: Targeting benefits and fiscal gains

If implemented well, the MyKad-based targeted subsidy is crucial for fairness and efficiency.

For now, the wealthy urban SUV owners enjoy the same cheap RON95 as those who are struggling, which makes this broad subsidy both inequitable and wasteful.

According to Investment, Trade and Industry Minister Tengku Zafrul Tengku Abdul Aziz (2022), for every RM1 of fuel subsidy, 53 sen benefits the T20 (top 20 percent income group) while only 15 sen reaches the B40 (bottom 40 percent).

Therefore, a MyKad system can help redirect the benefits to those who really need it (eg to lower and middle-income Malaysians).

Secondly, fuel subsidies comprise a large proportion of the national budget, which worsens the deficit and forces trade-offs in other fiscal spending.

Finance Minister II Amir Hamzah Azizan expected that rationalising RON95 subsidies could save between RM7.2 billion and RM7.5 billion per year (Finance Ministry, 2025).

Consequently, the money can reduce the deficit or be reinvested into infrastructure, public transport, or social programmes.

Moreover, by leveraging the national ID database (and the government’s new central database hub, Padu), subsidy distribution can be tied to a broader social welfare system for a more holistic social safety net.

Pitfalls: Data, privacy, and inclusion

Tying fuel purchases to personal IDs means a vast amount of sensitive information will be collected.

With that in mind, some might worry that it could pose data security risks like identity theft or misuse of information.

It was also pointed out in a Penang Institute (2024) policy paper that “security deficiencies in the public sector” could lead to potential misuse of personal data for political gain.

If the government were to implement this, it must ensure robust cybersecurity safeguards with end-to-end encryption of MyKad transactions and compliance with personal data protection laws.

Moreover, no system should collect more data than necessary.

Another pitfall lies in the accuracy and administration of the eligibility data. How will the system decide who deserves subsidised fuel?

If it’s based on income or some “high-income earner” list, there is a possible risk that inaccurate information on MyKad in databases could wrongly exclude people.

Thus, the government must establish a clear, accessible mechanism for citizens to check and appeal their subsidy status, as many are already calling for.

Transparency is crucial to prevent eligible Malaysians from being unfairly cut off due to bureaucratic error.

Ultimately, the government has to be actively open to public feedback, be transparent about the plan’s rollout, and have the humility to refine the approach as needed.

If the government can deliver a system that is secure, fair and user-friendly, it will not only achieve its immediate budget goals, but more importantly, win public confidence in the power of innovative policy solutions.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.