Towards a more equitable fuel subsidy plan?

Given the current global fuel prices, the increase of fuel prices in Malaysia was inevitable.

However I was a bit disappointed with the proposed revamp of fuel subsidy wherein the government has proposed as follows:-

i) a RM625 annual cash rebate per vehicle, for owners of private vehicles with engine capacities of up to 2,000cc, and pickup trucks and jeeps with engine capacities of up to 2,500cc;

ii) a RM150 annual cash rebate for owners of private motorcycles with engine capacities of up to 250cc;

iii) a RM200 road tax reduction for owners of private vehicles with engine capacities exceeding 2000cc;

iv) a RM50 reduction in road tax for owners of private motorcycles with engine capacities above 250 cc;

v) the proposed cash rebates will be paid via Money Order upon renewal of road tax, from July 1.

While I welcome the idea of some form of rebate, I am of the opinion that the rebate scheme as proposed by the government may not be very effective as it may not reach the target group especially the lower income group wherein:-

a) the proposed increase in fuel prices will not only affect owners of vehicles but will hit consumers across the board as everyone will be affected by an increase in the prices of goods and services. Therefore I would suggest that the proposed rebate of RM625 or such other amount deemed fit by the government be given to all persons(with a annual income of up to say RM60000 per annum) upon the filling of their tax returns wherein those whose income is not taxable will get a cash rebate paid to them by Money Order and those who have taxable income will get a reduction of their income taxes to the amount of RM625 or a cash rebate for the difference between the tax payable and the rebate entitlement. This will measure will also encourage more Malaysians to file their tax returns. In fact the law requires all those residing in Malaysia to file such returns but a large part of our society neglect this obligation.

b) in the event the government still prefers the proposed method of giving rebates by the engine capacities of the vehicles owned then the engine capacity should be reduced to not above 1600cc instead of 2000cc as anyone who can afford a RM100,00 or more Civic, Altis or Perdana should not be receiving any form fuel subsidy rebate. The depreciation of these cars itself far exceed whatever fuel bill their owners may have and they should be made to pay for their indulgences.

c) any savings made as a result of the lowering of the engine capacities of vehicles should be redirected to the owners of the lower cc cars and motorcycles wherein under the present proposed system:-

i) a owner of a car who currently spends RM300 per month on petrol per moth will be paying RM420 as a result of the 40% fuel price hike. However he will only receive a subsidy of about RM52.00 per month based on the proposed RM625 cash rebate for cars wherein his monthly fuel bill will be RM120 higher;

ii) as for motorcycles anyone who currently spends RM80 per month on petrol will be spending about RM112 per month based on the new prices. The rebate of RM150 per annum only works out to be RM12.50 where his monthly fuel bill will be about RM30 higher.

Therefore I would proposed that owners of vehicles under 1600cc be given a cash rebate of at least RM1200 per annum or RM100 per month and owners motorcycles under 250cc be given a rebate of RM300 per annum or RM25 per month.

This would certainly cushion the effects of the fuel price increase on the lower income group.

The rest of us would just have to bite the bullet and find ways and means to adjust to the higher fuel prices. As a start, my wife and I have decided to car pool together for between 2-3 days in our working week.

I would like to clarify here that I personally do not stand to gain from any of my proposals as I drive a 2500cc car (even though it may be a 13 year old car) and my annual income exceeds the threshold proposed by me.

I decided to pen my proposals as I feel that instead of lashing out at the government for the fuel price hike and ridicule their efforts to lessen the impact, those of us who are capable of making constructive suggestions should do so now in the hope that our government is able to frame a more equitable fuel subsidy plan.

Dominic Pillai a/l R.K. Pillai