Government rolls back fuel subsidies and slaps windfall taxes

Government rolls back fuel subsidies and slaps windfall taxes

In a major announcement released after market hours yesterday, the government has taken a bold step in cutting fuel subsidies and imposing windfall taxes on selected industries. A snapshot of the sweeping changes to be made is summarised in the following table. (Note: Petrol and diesel prices will fluctuate based on an automatic monthly adjustment formula in line with global prices, subject to a 30 sen subsidy).
As a consequence of these drastic measures, there will be broad-based implications – directly as well as indirectly – on the economy and various sectors.

Restructuring of fuel subsidy system
Item Existing New % chg
Petrol (RM per litre) 1.92 2.70 41%
Diesel (RM per litre) 1.58 2.58 63%
Gas price for:
- Electricity generation (RM per mmbtu) 6.40 14.31 124%
- Industrial user with consumption of <2mmscfd 9.40 24.54 161%
- Industrial user with consumption of >2mmscfd 11.32 32.60 188%
LPG (RM per kg) 1.75 1.75 -
NGV (sen per litre) 63.5 63.5 -

Cash rebate (to ease the burden):
- For owner of private vehicle up to 2,000cc RM625 p.a.
- For owner of private motorcycle up to 250cc RM150 p.a.

Road tax reduction (to ease the burden):
- For owner of private vehicle > 2,000cc Reduce by RM200
- For owner of private motorcycle >250cc Reduce by RM50

Windfall tax levy structure on:
Plantation
- East Malaysia: 7.5% for every tonne of CPO exceeding RM2,000
- West Malaysia: 15% for every tonne of CPO exceeding RM2,000
- Existing Cooking Oil Price Stabilisation Scheme will be abolished

Independent power producers
30% of the audited return on assets exceeding the 9% threshold

Source: Prime Minister Office website, various newspaper, HDBSVR