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No More RON95 Subsidies Beginning Dec.1, Says Hasan Malek

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KUALA LUMPUR — Putrajaya will stop providing any subsidy for RON95 petrol and diesel from next month onwards, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek said today.

Hasan also said the price for these two fuels will be set using the managed float mechanism from December 1.

“It is informed that the government through its Cabinet meeting today decided that from December 1, 2014, the retail price for RON95 petrol and diesel will be according to the managed float,” he announced.

Today’s abrupt announcement will see an end to the federal government footing the bill to allow Malaysians to pay cheaper rates for RON95 petrol and diesel, regardless of the market price.

It also comes after the federal government slashed the subsidy for RON95 petrol and diesel twice in recent months.

The RON97 petrol has already been put on the managed float system since July 2010 and is not subsidised by the government.

Hasan explained that today’s decision was carried out due to the success of the managed float system for RON97 petrol, adding that the government had already carried out studies before the latest move.

“This move proves the wishes of the government to ensure the public enjoys the full benefits following the drop in global crude oil prices,” he said.

Earlier in the statement, Hasan explained that the managed float mechanism would see the price of RON95 petrol and diesel reflecting increases or decreases in the prices of crude oil in the global market.

This is different from the Automatic Price Mechanism (APM) used by Malaysia since 1983, where the government sets a retail price that would be unchanged despite changes in cost.

To illustrate how the managed float mechanism would work, Hasan outlined the cost changes for the RON95 petrol in the November 1 to 19 period.

During this period, the average cost of the RON95 petrol was at RM2.27 per litre, which is lower than the retail price of RM2.30 per litre that consumers were paying, he explained.

The government will be monitoring the market price for the remaining days of November, with the total to determine the average retail price for next month, Hasan said.

He added that if the current trend shown earlier this month continues, the RON95 petrol is expected to be priced cheaper in December.

Diesel is now priced at RM2.20 per litre, while the RON97 petrol is sold at RM2.55 per litre following a recent 20 sen slash under the managed float system.

“The government will follow developments in the market rates of product costs at all times and the currency exchange rates to set the retail prices of petrol and diesel,” Hasan said.

Critics, particularly opposition politicians, had previously questioned the government’s decision to hike fuel prices by slashing subsidies for the RON95 petrol and diesel, when the global crude oil prices had fallen.MYNEWSHUB

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