Subsidy cuts focus of today’s Cabinet meeting
(The Malaysian Insider) – Subsidy cuts will top the agenda when Datuk Seri Najib Razak chairs the weekly Cabinet meeting today, with many speculating it will lead to hike for RON95 petrol and electricity rates.
Cabinet sources say the government has to trim the runaway subsidy bill which could balloon to RM21 billion if nothing is done.
On the table is the scheduled plan to cut subsidies for RON95 petrol and gas for independent power producers while increasing electricity tariffs in a growing economy.
Labs run by Performance and Management Delivery Unit (Pemandu) last year proposed 15 sen hikes every six month for RON95 petrol but the government decided to stick to 10 sen, ensuring a slow rise in the fuel’s prices.
“What has happened is that the high RON97 prices has pushed more people to use RON95, increasing the subsidy bill further,” a Cabinet source told The Malaysian Insider.
RON95 petrol is now RM1.90 a litre while the premium RON97 fuel is floated at market price of RM2.90 a litre, making it a great saving for motorists but a bigger share of the national budget.
The Malaysian Insider understands it is the same for electricity tariffs which should have been increased months ago but postponed to ensure the economy keeps growing at a quicker pace.
Pemandu’s proposal last year was to initially cut gas subsidy by RM4.65 per mmbtu and then set a corresponding 2.4 sen per kWh increase in tariffs in July 2010, followed by a 1.6 sen per kWh increase every six months.
