Budget 2019: Monthly RON 95 petrol subsidy from Q2 2019; 40L for kapchai, 100L for cars below 1.5 litres

Targeted fuel subsidies will be introduced sometime in the second quarter of 2019, which will cost the government RM2 billion annually, announced at the tabling of Budget 2019. This scheme will offer a subsidy of 30 sen per litre up to 100 litres a month, for cars with an engine capacity of 1,500 cc and below.

For motorcycles, those with an engine displacing 125 cc of capacity or less will be allocated the subsidy at the same rate of 30 sen per litre, for up 40 litres a month. The capacity limit for cars eligible for the RON 95 petrol subsidy has since been raised from the initial 1,300 cc mark in the earlier Pakatan Harapan manifesto, while the 125 cc capacity limit for motorcycles remains unchanged.

This targeted subsidy structure, however, does not apply to owners with multiple vehicles.

The mechanism for distribution of this fuel subsidy has not been elaborated on – might this targeted approach hint at a removal of the blanket subsidy for RON 95, which has remained fixed at RM2.20 per litre since the end of May this year? The higher RON 97 grade of petrol continues to be on a float, while diesel pricing was not mentioned.

As many as four million car owners and 2.6 million motorcycle owners will benefit from this targeted subsidy, the ministry of finance said. Non-subsidised vehicles will be required to pay the full price determined at the pump, set on a weekly basis based on the Automatic Pricing Mechanism (APM), which aims to halt leakages arising from fuel price arbitrage and cross-border smuggling, it added.

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