KUALA LUMPUR, Jan 29 — The shift from bulk RON95 petrol subsidies to targeted subsidies through BUDI Madani RON95 (BUDI95) is expected to reduce subsidy leakage and generate fiscal savings of around RM2.5 billion to RM4 billion per year, the Finance Ministry said.
It said this is subject to movements in world crude oil prices and currency exchange rates.
“These savings are not the result of reduced protection for the people, but rather the result of more accurate targeting of subsidies to eligible groups,” it explained in a reply posted on the parliament website to a question from Datuk Seri Ismail Sabri Yaakob (BN-Bera) regarding RON95 subsidy amount after the rationalisation in September, and how much savings there would be from the initiative.
The ministry added that in terms of determining RON95 prices, the retail cost is still determined based on the automatic pricing mechanism (APM), which considers world crude oil prices, refining costs, distribution costs and currency exchange rates.
In the context of subsidy rationalisation, BUDI95 does not change the APM mechanism, but improves the method of subsidy distribution.
This approach allows the government to control the growth of subsidy expenditure more effectively, especially in a situation where world crude oil prices are rising again, MOF said.
