Shahrir: No need for petrol subsidies

Domestic Trade and Consumer Affairs Minister Shahrir Abdul Samad revealed that the government has ceased petrol subsidies since the start of November as global crude oil price dipped below US$65 per barrel.

At a press conference in Parliament, Shahrir explained that even with the decision to reduce pump prices by 15 sen today, the government need not continue its subsidy.

Consumers now pay RM2 for RON97, and RM1.90 for diesel and RON92.

He added that the government might still make a "a bit of income" if prices shrink back to pre-June 5 prices of RM1.92 for RON97.

"The petrol subsidies disappeared once the global price of crude oil went down to US$65 per barrel," said Shahrir, explaining that the price is now around US$55 per barrel.

At present, the cost price of RON97 is below RM1.61, said the minister. This means that consumers are currently paying 39 sen above the actual price.

Shahrir said even after considering the 19 and 12 sen revenue per litre going to the energy companies and kiosk operators respectively - the government can still marginally profit from pump prices at the RM1.92 per litre level.

Moreover, the energy companies and kiosk operators pay the government in the form of taxes.

Shahrir’s statement was a departure from what the deputy prime minister-cum-finance minister had stated in his Budget 2009 winding-up speech on Nov 4.

Najib Abdul Razak had then said that the government would maintain a 30-sen fuel subsidy.

Car and bike rebates remain

When asked on savings from a no-subsidy policy in the current climate, Shahrir disclosed that it would be more than RM7 billion.

His calculation was based on the government’s subsidy bill in 2007 when crude oil prices averaged US$65 per barrel, which at RM8.8 billion is similar to the present price levels.

Therefore, Shahrir said the RM21 billion subsidy projected for 2009 will markedly drop at this rate.

"If crude oil stays under US$60 per barrel, I am expecting at least RM10 billion (in savings)," he said.

He also added that subsidies for diesel and natural gas are still in place especially for public transportation.

Also to be retained are car and motorbike rebates.

"We are still giving an RM625 rebate for cars and RM150 for motorbikes that goes straight into your pocket," he added.

He revealed the government is mulling a floor price, in lieu of a unstable global crude oil price.

"The government will have a discussion to decide what sort of policy or strategy in this floor price plan," he added.

A floor price is a government-imposed limit in which the price cannot be allowed to go lower than the set amount.