Malaysia to Implement Targeted RON 95 Petrol Subsidy in 2025: What You Need to Know
In a significant move to streamline government spending and redirect resources to crucial sectors, Malaysia has announced plans to restructure its RON 95 petrol subsidy program. Set to take effect in mid-2025, this change marks a shift from the current blanket subsidy to a more targeted approach just like the targeted diesel subsidy changes that came in this year.
The announcement, made during the tabling of Budget 2025, reveals that the current subsidy system costs the government a staggering RM20 billion annually to maintain RON 95 petrol prices at RM2.05 per liter. This substantial expenditure has long been a point of debate, with concerns raised about its sustainability and equitable distribution.
Under the new targeted subsidy scheme, the government anticipates saving approximately RM8 billion. This figure represents 40% of the total petrol subsidy, which, according to official statements, is currently being utilized by foreigners and the wealthiest 15% of consumers. By redirecting these funds, the government aims to enhance critical areas such as education, healthcare, and public transportation infrastructure.
Key Points of the RON 95 Subsidy Restructure:
- Implementation Date: Mid-2025
- Current Annual Subsidy Cost: RM20 billion
- Expected Savings: RM8 billion
- Percentage of Users Unaffected: 85%
- Continued Subsidy Amount: Estimated RM12 billion
It’s important to note that the majority of Malaysian RON 95 users will not be impacted by this change. The government has emphasized its commitment to maintaining subsidies for 85% of current users, ensuring that the new policy primarily affects those deemed less in need of financial support.
As of October 18, 2023, the unsubsidized price of RON 95 petrol stands at RM2.76 per liter, highlighting the significant difference between market rates and the current subsidized price. This gap underscores the financial burden the current subsidy system places on government resources.
While specific details about the implementation mechanism remain undisclosed, it’s unlikely to mirror the approach taken with diesel subsidies. The diesel subsidy system, which sets pump prices at full market value and provides eligible individuals with a monthly RM200 bank credit, may not be suitable for RON 95 due to its larger user base.
Speculation suggests that the income threshold for RON 95 subsidy eligibility could be higher than the RM100,000 annual income limit set for diesel subsidies. This assumption is based on the government’s focus on redirecting subsidies away from the top 15% of consumers.
As Malaysia moves towards this significant policy shift, citizens and businesses alike are advised to stay informed about upcoming announcements. The government is expected to release more detailed information in the coming months, providing clarity on eligibility criteria and the practical aspects of the new targeted subsidy system.
This restructuring of the RON 95 petrol subsidy represents a pivotal moment in Malaysia’s economic policy, balancing fiscal responsibility with social welfare. By targeting subsidies more effectively, the government aims to create a more sustainable and equitable system that benefits those most in need while freeing up resources for national development. How this will affect most Malaysians remains to be seen.
