Economists have voiced support for a two-tier pricing mechanism for the upcoming RON 95 petrol targeted subsidy, saying that the method is better than cash assistance, Free Malaysia Today has reported.
“A well-structured two-tiered pricing model, supported by MyKad or e-wallet verification, can help to streamline subsidy distribution while minimising operational disruptions. With MyKad or an e-wallet system, individuals receive their subsidies at the point of purchase, ensuring that only those who are eligible benefit,” said Tan Peck Leong of Universiti Teknologi Mara.
The system ensures that only eligible individuals have access to subsidised fuel while minimising financial leakage to higher-income groups, making it an effective way of implementing targeted subsidies, Tan said. This will also enable the government to introduce a subsidy cap for better control of expenditure while providing support to those who need it most, he added.
Meanwhile, economist Geoffrey Williams was quoted as saying that tiered pricing is by far the best approach for implementing the targeted subsidies for RON 95 petrol, and said that “other methods are flawed”.
Williams said that tiered pricing would allow subsidised purchases for small volumes, and non-subsidised purchases for large volumes, however he disagreed with the decision to use MyKad or other forms of identification to verify as the method could lead to fraud.
“The MyKad and e-wallets can be cloned, sold or traded to get the subsidies. The simpler method is to charge subsidised prices in low volumes and remove the subsidy in stages for higher volumes sold at point of sale,” Williams said, adding that vouchers will lead to a black market for the trade of vouchers, and charging by vehicle type would not stop the wealthy from purchasing subsidised RON 95 petrol while driving more affordable cars.
A tiered pricing system may be better for handling inflation, especially if it is staggered over multiple levels or introduced slowly over time, Williams added. “This is because it does not introduce the price change across the board and can be spread out,” he said.
In February, domestic trade and cost of living (KPDN) minister Datuk Armizan Mohd Ali said that the rationalisation of RON 95 petrol that will be carried out by the middle of this year will use the mechanism that ensures its benefits reach the intended groups and correct people.
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