The government’s reduction of the Budi95 petrol subsidy limit from 300 to 200 litres is a necessary fiscal move, but its impact on living costs must be carefully managed.
THE government’s decision to reduce the petrol subsidy limit under Malaysia’s Budi95 programme from 300 litres to 200 litres has sparked various reactions among the public.
Some view it as a necessary step to reduce national expenditure, while others are concerned about its impact on the rising cost of living. The question is to what extent is this measure justified from an economic perspective and how does it affect the everyday lives of the people?
From an economic viewpoint, this move is grounded in a fairly strong rationale. Fuel subsidies represent one of the government’s largest expenditure components.
When global oil prices fluctuate, the total subsidy bill can increase rapidly and place significant pressure on national finances.
Hence, by reducing the subsidy limit, the government aims to control the fiscal deficit while ensuring that financial resources can be redirected to more critical sectors such as education, healthcare and infrastructure development.
In other words, this move helps to maintain the country’s economic stability in the long run.
However, the direct effects on the domestic economy cannot be overlooked. When subsidies are reduced, petrol costs increase for certain segments of the public. This effect can spread to other sectors, particularly transport and logistics.
As delivery costs rise, the prices of goods and services may also increase. Although these increases may not be substantial in the early stages, they still add pressure to the overall cost of living.
The most noticeable impact felt is the decline in purchasing power. With the lower subsidy limit, consumers must pay more for petrol consumption that exceeds 200 litres.
This means that a larger portion of monthly income must be allocated for fuel expenses, thereby reducing the remaining funds available for other needs such as food, education and savings.
Lower- and middle-income groups, particularly those who rely on vehicles for work, are those among the most affected.
Nevertheless, the measure can also be seen as an effort to encourage more efficient use of resources. When prices reflect their actual costs, consumers are more likely to reduce wasteful consumption.
In the long-term, this may encourage more sustainable behavioural changes, including a shift in transport modes, from private vehicles to public transport, carpooling, cycling or walking. It may also lead to fewer trips and shorter distances, while boosting demand for hybrid and electric vehicles.
The reduction of petrol subsidy limit is a policy with clear economic justification but its impact on the public must be managed with caution.
The government should strengthen a targeted approach by considering factors such as location, type of employment and income level.
In addition, cash assistance and improvements to public transport systems can help to ease the people’s burden.
A transparent and accessible policy of communication will ensure the public’s better understanding and acceptance of the reasoning behind this decision.
Ultimately, maintaining a balance between economic stability and the well-being of the people should remain as the central priority.
Dr Azlina Abd Aziz is an associate professor at the Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu. Comments: letters@thesundaily.com
