Malaysia considers dumping petrol subsidy scheme

Agence France-Presse - 11/18/2008 9:35 AM GMT

Malaysia is not currently subsiding petrol and may dump its subsidy scheme altogether, despite major protests earlier this year over spiralling pump prices, a minister said Tuesday.

The government on Tuesday cut pump prices by seven percent to 2.00 ringgit (0.56 dollars) per litre as global crude prices continued to ease. The price of diesel was also reduced by 15 sen to 1.90 ringgit per litre.

"We have stopped subsidising petrol from the time when the pump prices were cut to 2.00 ringgit per litre," Domestic Trade and Consumer Affairs Minister Shahrir Samad told AFP.

He said that at current prices, the government is making about 30 sen per litre.

"At about 60 dollars per barrel we are already making money," he said.

Shahrir said the government was still handing out direct subsidies in the form of cash rebates for motorists of 625 ringgit per year and that diesel and liquefied petroleum gas (LPG) were still being subsidised.

"The rebate system is still being enforced... but it will runs its course until March next year before we either stop it or implement a new system," he said.

Tuesday's cut was the fifth the government has announced since a 41 percent hike in June as the price of crude soared, sparking angry street protests and calls for Prime Minister Abdullah Ahmad Badawi to resign.

Shahrir said the government will decide by the end of the month if subsidies will be reinstated if crude oil prices go up again. It will consider setting a floor price of 1.92 ringgit per litre.

"I would be happy to have a floor price of 1.92 ringgit. This would allow the government to earn some revenue and it is also easier to manage the price," he said.

"It is also a better option because we can use the savings for development or to reduce the deficit."

The government earlier this month announced a 7.0 billion ringgit (2.0 billion dollar) stimulus programme -- reaped from savings on reduced oil subsidies -- to boost the economy amid the global slowdown.

But the additional spending saw the government widen its budget deficit forecast for 2009 to 4.8 percent, from 3.6 percent predicted in August.

http://news.my.msn.com/regional/article.aspx?cp-documentid=1791236