Ramasamy on “Malaysia’s fuel paradox: Rising prices, falling relief”

COMMENT BY PROF DR P.RAMASAMY
CHAIRMAN, URIMAI PARTY

It is indeed ironical that Malaysia’s dependence on hydrocarbon revenue through the agency of Petronas might be sustainable. However much revenue is generated from exporting crude petroleum and liquefied natural gas (LNG), the lack of proper distribution of this revenue—particularly in alleviating the rising consumer fuel bill—remains the problem.

Malaysia might be an exporter of fuel, but it imports refined fuel in the form of petroleum and diesel. The refining process, together with insurance and freight charges, imposes a major burden on the transport industry, especially on those who rely on private cars for everyday transport.

The underdeveloped public transport system renders consumers heavily dependent on cars. Given the escalating fuel prices, the government has no choice but to step in and increase fuel subsidies for consumers. I understand that the restrictive shipping in the Straits of Hormuz has affected fuel supply to the extent that prices have galloped.

The prices of the two grades of petroleum and diesel have increased virtually overnight. The problem in Malaysia is the fact that there are no properly targeted subsidies aimed at the affected socio-economic groups. While there is a generalised subsidy for all classes, especially for petroleum, the diesel subsidy—though targeted to some extent—offers only a limited quantum per individual.

Now, with the sudden price increase, the allocation is small and far between. I understand that the overall profits of Petronas have decreased over the last few years.
While Petronas cannot bankroll government debts, it is expected to play a meaningful role in the lives of Malaysians in easing their economic burden. The government might have increased the fuel subsidy from RM700 million to RM3.2 billion to offset the fuel price increase. But this increase represents only a very small portion of Petronas’ net profit.

Surely, the government should at least be prepared to spend a larger portion of Petronas’ profit on subsidising the rise in fuel prices. The recent increase in both petroleum and diesel prices is too dramatic and punishing for consumers, especially those in the lower socio-economic groups. The government, headed by Prime Minister Anwar Ibrahim, should re-examine the profit margins of Petronas to ensure an increase in subsidies for both petroleum and diesel.

Consumers, given the rising prices in other areas of the economy, cannot sustain themselves under the present subsidy structure. Anwar might be right to some extent in blaming the US-Iran conflict for the present oil crisis. However, as the Prime Minister of the country, he has failed to provide leadership in diversifying the economy away from its overdependence on hydrocarbon fuels for revenue.

Moreover, the lackadaisical attitude of the government in developing a comprehensive public transport network across the country has made public dependence on cars even more acute. At present, rather than engaging in polemics and appeasement politics, Anwar should take systematic measures to reduce the burden on consumers struggling with exorbitant fuel prices.

I suggest that the government appoint a high-powered bipartisan parliamentary committee to examine and analyse the increase in fuel prices, with the possibility of diverting more Petronas funds to subsidise consumers.

Anwar cannot simply blame the conflict in the Middle East to avoid taking meaningful action.