The Malaysian public is reacting to a new petrol pricing mechanism that will be implemented by the Najib administration soon.
The total government's subsidies budgeted in 2010 are RM20.9 billion, down from the RM24.5 billion spent in 2009 and RM35.2 billion in 2008.
The government spends 8,000 ringgit per capita annually on various subsidies including fuel. It could save as much as 1 billion ringgit this year by revamping its system for fuel subsidies.
From May 1, Malaysians and non-citizens will have to pay different petrol prices as foreigners are not eligible for subsidized petrol.
The Government is likely to put a cap on the amount of subsidized petrol that a car owner can buy monthly. The price for Malaysians will depend on engine capacity and “socio-economic” factors and MyKad will be used to determine the eligibility while purchasing petrol.
Currently, the Government is subsidizing petrol at 30 sen per litre. The market price for RON 95 is RM2.10 per litre but due to subsidy, the pump price reduces to RM1.80.
Subsidy is a centrally planned measure that money paid to a given product by the government in order to lower the price. It is a form of assistance which claimed that social justice has been taken into account.
One of the adverse effects of subsidies is market distortion, which cause the prices of the commodities do not reflect its actual cost. It also jeopardizes the national economy as it would lead to excessive fuel consumption and wastage in addition to unhealthy practices such as illicit trade, cheating and smuggling.
Ironically, this idea of subsidy is polarized of the view that subsidies should be removed and the money save can be channel into other development projects.
The main justification is most subsidies implemented do not effectively benefit the targeted poor rather; the poor are being exploited. The subsidy will reduce the funds available to assist the poor and the rich who feed fat on the subsidy.
This school of thought argues that countries that subsidized fuel has tremendous negative impact which cause demand to continually rise steeply, threatening to outstrip the growth in global supplies.
It is argued that if subsidy not implemented properly which cause a large difference between subsidized and market prices, not only corruption rampant, any effort to reform the system will be suppressed.
Generally, in order to make the price of oil more affordable, governments provide subsidies, which cause the price of oil to remain fixed below free floating market rates.
However, if oil prices increase, the policy of heavily subsidizes oil prices may suffer as the cost of the subsidies will consume ever-larger amounts in their budgets.
Huge subsidies are "opportunity costs" which prevent to build more schools, hospitals and public facilities which would provide long-lasting benefits to a larger segment of the population.
Developed economies rather than subsidizing the fuel, often place a tax on every liter of petrol sold, to discourage over-consumption by the rich.
Undoubtedly, the new petrol pricing mechanism is the ideal policy, but it should be implemented for the benefit of the public as a whole without any unbelievable strings attached or hidden agendas.
The total government's subsidies budgeted in 2010 are RM20.9 billion, down from the RM24.5 billion spent in 2009 and RM35.2 billion in 2008.
The government spends 8,000 ringgit per capita annually on various subsidies including fuel. It could save as much as 1 billion ringgit this year by revamping its system for fuel subsidies.
From May 1, Malaysians and non-citizens will have to pay different petrol prices as foreigners are not eligible for subsidized petrol.
The Government is likely to put a cap on the amount of subsidized petrol that a car owner can buy monthly. The price for Malaysians will depend on engine capacity and “socio-economic” factors and MyKad will be used to determine the eligibility while purchasing petrol.
Currently, the Government is subsidizing petrol at 30 sen per litre. The market price for RON 95 is RM2.10 per litre but due to subsidy, the pump price reduces to RM1.80.
Subsidy is a centrally planned measure that money paid to a given product by the government in order to lower the price. It is a form of assistance which claimed that social justice has been taken into account.
One of the adverse effects of subsidies is market distortion, which cause the prices of the commodities do not reflect its actual cost. It also jeopardizes the national economy as it would lead to excessive fuel consumption and wastage in addition to unhealthy practices such as illicit trade, cheating and smuggling.
Ironically, this idea of subsidy is polarized of the view that subsidies should be removed and the money save can be channel into other development projects.
The main justification is most subsidies implemented do not effectively benefit the targeted poor rather; the poor are being exploited. The subsidy will reduce the funds available to assist the poor and the rich who feed fat on the subsidy.
This school of thought argues that countries that subsidized fuel has tremendous negative impact which cause demand to continually rise steeply, threatening to outstrip the growth in global supplies.
It is argued that if subsidy not implemented properly which cause a large difference between subsidized and market prices, not only corruption rampant, any effort to reform the system will be suppressed.
Generally, in order to make the price of oil more affordable, governments provide subsidies, which cause the price of oil to remain fixed below free floating market rates.
However, if oil prices increase, the policy of heavily subsidizes oil prices may suffer as the cost of the subsidies will consume ever-larger amounts in their budgets.
Huge subsidies are "opportunity costs" which prevent to build more schools, hospitals and public facilities which would provide long-lasting benefits to a larger segment of the population.
Developed economies rather than subsidizing the fuel, often place a tax on every liter of petrol sold, to discourage over-consumption by the rich.
Undoubtedly, the new petrol pricing mechanism is the ideal policy, but it should be implemented for the benefit of the public as a whole without any unbelievable strings attached or hidden agendas.
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1 comments:
rob the rich and help the poor or rob the ppoor for own pocket?
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