Deputy Prime Minister Najib Razak has denied accusations that hundreds of millions of dollars saved from higher petrol prices would be used for corporate bailouts.

"There are rumours that the government will use two billion ringgit to bail out MAS (Malaysia Airlines) or any other government-linked companies. This is a lie and I deny it," Najib was quoted as saying by the Star daily.

Najib said the money saved would be deposited into a trust fund and used to improve public transport.

His comments come amid widespread anger over the fuel price hike which has prompted two rare anti-government protests.

The government recently upped the price of petrol and diesel by 30 sen per litre in a bid to cut back on subsidies, which now stand at around RM12.9 billion.

The government has said that fuel subsidies would eventually be scrapped to develop schools and rural infrastructure.

But opposition parties have accused the government of planning to use the money it saved on bailing out struggling state-owned firms such as MAS.

Tenaga told to revise proposed hike

Prime Minister Abdullah Ahmad Badawi was forced to launch an information offensive last week to counter public dismay, and explain the rationale for the steep hikes.

In an apparent move to stem further disgruntlement, the government has asked utility giant Tenaga Nasional to revise a proposed tariff increase.

Energy, Water and Communications Minister Lim Keng Yaik was quoted as saying by the national Bernama news agency that the cabinet rejected the proposed 10 percent hike.

Tenaga must take into account the interests of low-income earners, Lim said, adding that the cabinet had suggested Tenaga raise tariffs only for consumers using more than 200 kilowatt-hours of electricity a month.

The state-controlled power firm, which has debts exceeding RM30 billion, hasn't increased its power prices in years despite rising operating costs. It last revised its rates in 1997 when tariffs were increased by 8.3 percent.