I have been an advocate of cutting petrol and diesel subsidies for a long time. Despite last night announcement hit me considerably in the pocket, I do believe that doing away with the subsidy is a very good move for long term sustainability. Not just monetarily, also environmentally.
Yesterday, the first news that came out about the removal of petrol and diesel subsidies came from Malaysian Insider (“MI”) at about 5.20pm. This is even before Pak Lah’s announcement. It was reported that Datuk Shahrir Samad told MI that the petrol and diesel price will be increase to RM2.70 and RM2.58 respectively by August. About 20 minutes later, Pak Lah announced that the petrol and diesel price would be increase to RM2.70 and RM2.58 at midnight. Shahrir Samad being the Domestic Trade and Consumer Affairs Minister should be the one who came out with the plan. And I bet Pak Lah would have been briefed about the plan before he makes the announcement. Why there was confusion? Did somebody make a mistake?
The only thing that bothers me is the manner the government implements this policy. In my honest opinion, increasing the price straight to RM2.70 is a bit too drastic. If I’m using RM400 worth of petrol every month, I will need to pay RM560 now for petrol monthly. That means I have to pay an extra RM110 on fuel.
Anyway, let see the repercussion of the petrol and diesel price hike. Petrol and diesel, despite not being in Malaysia CPI calculation, is the single most important commodity for Malaysians. In fact, Malaysians probably spent more on petrol than they do on rice. A hike in price will not be the end of the story. It has a domino effect on all goods in Malaysia. In yesterday announcement, Pak Lah already announced one of the effects of petrol and diesel price hike, increase electricity tariffs. Despite boasting so many hydroelectric dam, diesel is still the main source of electricity.
The next thing that will go up is the logistic cost. Public transportation and freighter companies will have to adjust their prices with the implementation of new fuel price. Public transportation might be cheaper alternative than to drive, but bus and LRT fare will also increase. Hence, the public spending power will still be reduce.
Sooner or later, all goods and services will have to increase their prices or charges. Companies won’t be able to retain their old prices if all their costs increase. So, instead of only paying extra RM110 per month, I actually might spend RM300-400 extra monthly to maintain my current spending pattern. That is just calculating the basic expenditure, no luxury spending, plus I’m a single guy with no dependent.
Many people will be badly affected with this fuel hike. The effect won’t take place immediately. You still can see many cars on the road today. But in a month or two, people will begin to feel the full affect of this round fuel hike. With the economy not doing so good, if the government doesn’t take necessary action to take some of the burden off the public, we might see the government facing the full brunt of the public’s anger.
