Another Government flip flop on fuel subsidy

I do not know whether it is a case of a minister being transparent or just another stupid statement that will surely make the present Government look very bad in the eyes of the public.

It was reported today that Shahrir admitted that the Government has decided to break its earlier promise to maintain a RM0.30 per litre petrol subsidy. In June 2008, when the Government made the initial flip flop by abruptly announcing a hefty 40% jump in petrol prices to RM2.70, they have promised to maintain the subsidy even if there were continued fluctuation in the global crude oil price (upwards or downwards).

Now, Shahrir has said that at a price of US$65 per barrel, the Government has stopped paying subsidies and instead would decide on a floor price for petrol prices.

At the current retail price of RM2.00 per litre, the Government is not providing anymore subsidies to the consumers. Shahrir was even quoted as saying that the petrol retail price can actually return to the pre-hike price of RM1.92 per litre.

So, why the heck did that the Government stopped at RM2.00 and not straight to RM1.92?

At the same interview, Shahrir was also quoted as implying that the Government is currently deriving petrol tax of RM0.39 per litre from the consumers. So, instead of getting RM0.30 from the Government, are we now paying RM0.39 to the Government for every litre of petrol?

In fact, based on Shahrir’s statement, the petrol price can go as low as RM1.62 per litre if the Government maintain the fuel subsidy.

The opposition will certainly have a field time attacking the Government in the next few days. Anwar will re-iterate his idea of a lower petrol pump prices. Another UMNO-bashing session will be on its way.

[Post-script: Shahrir asked that the consumers be reminded that the Government has actually not stopped giving out fuel subsidy. He was referring to the RM625 per car fuel rebate. But hello, that RM625 rebate was on top of the RM0.30 per litre subsidy promised by the Government earlier!]

The news report is reproduced below:-

Govt has stopped paying petrol subsidies: Shahrir
By ROYCE CHEAH

KUALA LUMPUR: The Government has stopped paying subsidies for petrol since the beginning of this month due to lower global oil prices, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said.

“The savings on petrol subsidies next year is expected to be more than RM10bil if oil prices remain stable,” he told reporters Tuesday at the Parliament lobby here.

Elaborating, Shahrir said that at a price of US$65 per barrel, the Government would not be paying subsidies and that the focus now would be on deciding whether to set a floor price or figuring out a way for the Government to get some income from the sale of petrol.

“Even with petrol retailing at RM2 per litre, we are not paying any subsidies. We have actually arrived at a time when the price can return to RM1.92.

“In that context, we hope to be able to set a policy to address this when the National Economic Council next meets. A decision must be made on the floor price.”

Shahrir said that for six months from September 2001 to February 2002, the Government had collected taxes from the retail sale of petrol and had stopped that practice since February 2002.

“Earlier announcements of how much the subsidies cost us, even as recent as 2005 or 2006 always included how much we had to forego in terms of taxes. We have stopped doing this however and just focused on how much subsidy we are paying.”

Shahrir said the Government was now enjoying some revenue due to the difference in the ex-refinery price and the price oil companies sell petrol to station operators.

He added that the revenue being taken now was a form of tax that could max out at 60sen per litre.

“After the station operators take their margin of 12.1sen and the oil companies take their margin of 19.1sen, we are left with RM1.69 from RM2.

“If the refinery price is RM1.30 per litre for example, the Government will be taking 39sen per litre as revenue.”

Shahrir also released information on the amount of fuel subsidies paid so far which have amounted to RM15.57bil as at the end of October.

Fuel subsidies last year cost the Government RM16.18bil.

The fuel subsidies in October amounted to RM610mil as compared toRM2.99bil in May when oil prices peaked at over US$120 per barrel.