Yet more on the targeted approach to fuel subsidy being planned by the government. Earlier this week, finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said that a mechanism for targeted subsidy is being tested, and that the system would be trialled for between three to six months before it is implemented.
Now, a potential method that might be employed for the format has been indicated, and it comes in the form of e-wallets. This was revealed by Datuk Johan Mahmood Merican, deputy secretary-general for policy of the treasury at the ministry of finance.
Speaking on BFM‘s The Breakfast Grille morning show yesterday, he said that trials utilising e-wallets was already underway. “We’ve started a pilot test with petrol stations using e-wallet platforms. We’re looking at another between three to six months of testing before we’re ready to go live, because it is something that we don’t look at lightly,” he said, without providing any details on how the system works.
He said that the government needed to ensure that everyone would be able to use the system. “Those in urban areas may be very used to e-wallets, but this might not be the case in rural areas or for the elderly, so we need to ensure that it’s really something easy to use, and upon implementation on a nationwide level, does not create too many problems for the rakyat,” he said, adding that the ministry would also continue to look at other methods.
Previously, finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said that a big chunk of the fuel subsidy in the mechanism in place right now is enjoyed by the top 20% of earners in the country, at RM8 billion compared to the RM6 billion benefitting the bottom 40% (B40).
The government is hoping to address this with a revision of the mechanism for electricity and petrol subsidies to make it more targeted and focused on those who need it. Johan reiterated that the current imbalance meant that the removal of a blanket fuel subsidy was imperative from a financial viewpoint.
“When we look at our household expenditure survey, we note that on average a typical B40 family spends only about RM165 a month on fuel, whereas the T20 spends about RM500. They benefit three times more in subsidies compared to the B40,” he said.
He said the challenge would be how to enable the B40 to enjoy subsidised prices, but have the higher income earners pay higher prices. “The question is, how do you segment it? How do we engineer a mechanism where the pump prices are higher but the mechanism allows for identified groups such as the lower income or even the M40 to be able to buy at least a quota of fuel at a subsidised price?”
One way it can be done, he said, is by “trying to replicate what we experience for our Tenaga (electricity) bills, where you consume less, you pay a lower rate, that’s what we’re trying to work on.”
“The challenge of implementation is, whereas an electricity bill is one meter per home, more than one person from a household can go and purchase fuel, so we need a system that is adaptable and will enable us to allow the targeted groups (B40 and M40) to access the subsidised fuel,” he explained.
Questions abound, plenty of them in fact, since no one knows the mechanics of the system that will be employed. Would the format involve RON 95 and diesel prices having their price cap being removed completely, with those in targeted B40/M40 groups given a subsidy in electronic credit to offset fuel purchases?
Would there be a determined amount of credit on a monthly basis, with the first RM100 or RM200 being fully subsidised, with prices subsequently climbing with increased usage (even if you’re in the targeted group), as per how the electricity bill format works? Does this mean that payment for fuel can only be made electronically (cashless) in order to obtain the subsidy?
There are many more questions, including as to how the new system would work at preventing price hikes elsewhere (as fuel prices increase as a result of blanket subsidy removal), but until details come about, it’s all conjecture. What’s your take on the e-wallet angle? Share your thoughts with us in the comments section.