The Challenge
Why Reform Was Necessary
Malaysia's diesel subsidy expenditure increased dramatically over recent years, creating an unsustainable burden on government finances. The rapid rise in subsidy costs became a pressing issue that demanded reform.
Subsidy Cost Explosion
The annual cost of diesel subsidies skyrocketed from:
Diesel consumption growth significantly outpaced vehicle registration:
The solid blue line shows how much total diesel use has grown since 2021. The gold dashed line shows how much the number of diesel vehicles has grown. By 2023, diesel use has risen much more than vehicle numbers, so it’s the same trucks and cars using more fuel, not just more vehicles on the road.
In this view, the blue line tracks total diesel burned each year, and the gold dashed line tracks how many diesel vehicles were added each year. Even when fewer new vehicles were registered in 2023, fuel use kept climbing. That means the existing vehicles are driving farther or hauling heavier loads, using more diesel per vehicle.
Cross-Border Leakage
The diesel price increased from RM2.15 per liter to RM3.35 per liter, a 56% increase. This adjustment aligns the price more closely with market rates while targeted assistance programs help mitigate the impact on vulnerable groups.
Source: Ministry of Finance Malaysia. (2024, June 9). Government Implements Targeted Diesel Subsidy for Peninsular Malaysia Effective 10 June 2024. Retrieved from https://www.mof.gov.my/portal/en/news/press-release/government-implements-targeted-diesel-subsidy-for-peninsular-malaysia-effective-10-june-2024
Source: Diesel Price Increase to RM3.35 Per Litre Effective Today, June 10, 2024. Retrieved from https://www.mycarsearch.com.my/latestnews/nid/141443/?utm_source=chatgpt.com>