Malaysia petrol prices could rise 15 sen/litre
May 2010

Malaysia’s government could hike petrol prices by an initial 15 sen per litre from their current price at some stage this year under plans presented by a body advising the government on how to cut subsidies.

The benchmark RON 95 grade currently costs RM1.80 per litre.

The proposals were made in a public presentation today to win over voters to accepting higher prices as Malaysia seeks to reduce its budget deficit which stood at a 20-year high of 7 percent of gross domestic product in 2009.

Under the proposals presented by the advisory body, the price of petrol would be hiked some time this year followed by two price hikes totalling 20 sen per litre in 2011 and two more of 20 sen per litre in 2012.

In 2013-2015, the price hikes would slow and by the end of 2015, the price of RON95 would stand at RM2.60 per litre, according to the plans that have yet to be approved by the government.

The forecasts were based on a crude oil price forecast of US$73.06 per barrel for 2011 and US$79.41-$94.52 for 2013-2015.

Idris said the government may fork out a staggering RM200 billion to subsidise petrol and diesel prices in the next 20 years unless fuel prices are raised.

Fuel subsidies represent 5.0 to 44 per cent of Malaysia’s fiscal deficit (and) “it is a huge burden for the country,” he said when opening the Subsidy Lab Open Day in Kuala Lumpur to receive feedback from the public on subsidies.

With Malaysia consuming more fuel compared with other countries in the region, he said “Malaysians need to be aware that we are one of the highest subsidised nations.”

The difference between the pump price and actual market is subsdised, he said in his remarks to members of the public at the lab.

The lab comes under PEMANDU, the Performance Management and Delivery Unit of which Idris is the chief executive officer.

He said that crude oil price, currently hovering at US$71.51 per barrel, is expected to continue to increase to US$75.37 this year.

Idris said that the fuel subsidy should be reviewed because it mainly benefits the middle and high income groups.

“There are a lots of leakages. Malaysia will be a net importer of petroleum products by 2011 (and) the subsidy bill will increase to about RM200 billion in next 20 years,” he said. – Reuters, Bernama

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