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THE government is moving to strengthen and expand its targeted fuel subsidy system after surging global oil prices linked to the escalating Middle East conflict caused the government’s petrol and diesel subsidy bill to rise by more than 370 per cent within a month.
Domestic Trade and Cost of Living (KPDN) Minister Datuk Armizan Mohd Ali said the government remained committed to maintaining targeted fuel subsidies despite mounting fiscal pressures triggered by the worsening global energy and supply crisis.
According to the government, fuel subsidy expenditure for petrol and diesel stood at RM1.29 billion in January and RM1.20 billion in February 2026 before the regional conflict intensified.
However, following the outbreak of war in the Middle East on February 28, subsidy costs surged dramatically to RM5.67 billion in March alone.
The figure excludes subsidies for other fuel categories, with Putrajaya expected to continue absorbing elevated energy costs as long as global oil prices remain high and supply disruptions persist.
“In facing the West Asian conflict which has triggered a global energy and supply crisis, particularly the sharp increase in global oil prices, the government remains committed to continuing fuel subsidy distribution,” the statement said.
The government said it was implementing a range of targeted mitigation, intervention and cushioning measures across ministries and agencies to reduce the impact of the global energy shock on the rakyat.
Under the supervision of the Ministry of Domestic Trade and Cost of Living, one of the immediate measures approved by Cabinet was the continuation and enhancement of fuel subsidies through the Subsidised Petrol Control System (SKPS) and Subsidised Diesel Control System (SKDS).
As of May 20, a total of 179,716 companies involving 432,495 vehicles in the public transport, freight transport and public water transport sectors had benefited from subsidised petrol and diesel schemes.
The figures include 19,189 companies involving 38,817 vehicles under SKPS and 160,527 companies involving 393,678 vehicles under SKDS.
Following a Cabinet meeting on May 20, the government approved several major improvements to the SKDS implementation mechanism aimed at balancing broader access with stricter controls against leakages and abuse.
Among the most significant changes is the nationwide expansion of diesel subsidy eligibility for jeep and pickup vehicles used in the land freight transport sector.
Previously, such eligibility had been restricted to operators in Cameron Highlands.
“Companies in the land freight transport sector nationwide that own jeep and pickup vehicles can begin registering for SKDS effective June 1, 2026,” the statement said.
The government will also extend subsidised diesel benefits to jeep and pickup vehicles previously registered under individual ownership, provided ownership is officially transferred to registered companies.
Individuals involved in goods transportation activities are being encouraged to register businesses with the Companies Commission of Malaysia, the Malaysia Cooperative Societies Commission or relevant state authorities in Sabah and Sarawak before transferring vehicle ownership through the Road Transport Department Malaysia.
At the same time, the government is tightening enforcement mechanisms by introducing fixed monthly quota limits for each fleet card issued under the SKDS programme.
Each fleet card will now carry a monthly quota ranging from 900 litres to 5,000 litres depending on the category of vehicle involved across 23 designated transport vehicle types.
Authorities said the revised quota structure was developed using analysis of transport usage patterns over the past two years of SKDS implementation.
The quota adjustments will also take effect from June 1.
Companies requiring fuel volumes beyond the prescribed limits may submit appeals to the Petroleum Subsidy Approval Committee managed by KPDN.
Applications can be submitted online through the MySubsidi system or physically at ministry offices nationwide, with approvals to be evaluated based on genuine operational needs and historical fuel consumption records.
The ministry also reiterated warnings against abuse of subsidised fuel schemes, stressing that any misuse involving fleet cards supplied by petroleum companies would trigger immediate suspension and blacklisting.
“Any misuse will result in the immediate suspension of fleet cards and the companies involved will be blacklisted,” the statement said.
The expanded subsidy framework reflects the government’s growing effort to shield businesses and transport operators from escalating global fuel prices while simultaneously tightening oversight to prevent leakages that could further strain public finances amid the prolonged international energy crisis. - May 23, 2026
