Close Share

PUBLISHED: Oct 2, 2014 6:11pm

Subsidy cut surprising, says oil and gas expert

TRP011014-2

HAMZAH NAZARI By:
Hamzah Nazari

Following a RM0.20 reduction in the fuel subsidies, the price of RON95 increased to RM2.30 per litre from RM2.10 per litre while diesel increased to RM2.20 per litre from RM2 per litre last night.

Adjust Font Size:

KUALA LUMPUR, Oct 2, 2014:

The petrol price hike is a big surprise, particularly as it applies to the types of fuel that is used by a majority of Malaysians according to oil and gas expert Anas Alam Faizli, who also added that it seems to fly in the face of announcements of the impending budget.

“Prime Minister Datuk Seri Najib Razak has recently announced that the incoming Budget 2015 will focus on the rising cost of living, surely transportation is a big portion of it,” said Anas.

Following a RM0.20 reduction in the fuel subsidies, the price of RON95 increased to RM2.30 per litre from RM2.10 per litre while diesel increased to RM2.20 per litre from RM2 per litre last night.

“A price increase will affect everything in its vicious cycle of increasing price and will directly and indirectly increase the cost of living,” Anas told The Rakyat Post.

Clarifying how the price of fuel in Malaysia was derived, he said the formula used to calculate the price of fuel was called the Automatic Pricing Mechanism, which had been in place since 1983.

“Its function is to stabilize the price of petrol and diesel in the country and manage whether the final fuel price will either include subsidy as cost to government or tax as revenue to the government.”

He pointed out that the price was not taken from Crude Oil price but was based on the Mean of Platts Singapore (MOPS) which was based on the daily average of transactions between buyer and seller of petroleum-based products and was updated by Platts.

He said that by referring to the MOPS price and including the add-ons the price of fuel could be derived as RM2.46.

“So, the government will be subsidizing around 16 sen for RON95, based on above MOPS and as the announced calculation.

“The APM mechanism will allow the government to collect taxes when the product cost is low and exempt taxes as well as grant subsidies when the product cost increases.

“According to the Sales Tax Act 1972 the maximum the government can subsidize or collect tax is 58 sen.

“However, the government has announced that it will subsidize maximum 30 sen in a long-term plan to ease its burden.

“Is the government cutting subsidies at the right place and where is the money used spent at?

“Such as for 2013, the subsidy for sugar would have only cost RM278 million but was taken out last year compared with the billions spent for other form of subsidies,” he said.

Anas also criticised Deputy Finance Minister Datuk Ahmad Maslan for a statement made two weeks ago that people earning below RM3,000 only used RM132 of petrol, or roughly 2.1 litres a day, and those earning below RM5,000 used RM375 petrol, or 5.95 litres, a day.

“According to EPF, 78% of Malaysians are earning below RM3,000 per month.

“Let’s assume everyone drives a Kancil, which is doubtful.

“Can they survive on 2.1 litres a day?

“Assuming they only fuel up 4 times a month, that’s already 32 litres multiplied by 4, multiplied by RM2.30 which is RM294.40!

“Maybe he’s assuming that 78% of Malaysians are taking motorcycles everyday and only use 2.1 litres of petrol everyday. Even then, why is there bad traffic?

“Everywhere else, the petrol pump price is going down but we are going up,” said Anas.

LATEST CONTENT

LEAVE US YOUR FEEDBACK

How do you like the new site

Leave your feedback here.

Have a story worth sharing?

Send us your details here.

Copyright © 2015 The Rakyat Post

Terms of Use ›   Privacy Policy ›   Contact ›