Subsidies & Inflation

Cooking Oil & Petrol Subsidies Make No Sense

Yesterday at my local no frills supermarket Lxxxxx @ Tanjung Tokong, I chanced upon a customer with a carton of subsidised cooking oil in plastic bags (@RM2.50 per 1 kg bag) . Naturally I tanya where you beli ? (Malay for “Where did you buy”) I followed her directions and got 4 bags for RM10.

At a check out counter where I attempted to pay, the supermarket cashier scolded me. He said too many (rich ?) people bought the cheap subsidised cooking oil intended for B40 families, so forcing Lxxxx to impose a rule that each family is only allowed to buy 3 bags at subsidised prices. So the cashier took away one of my 4 bags. (The cashier was very polite and he was of course correct - there was a sign in small type that said only 3 bags per family that I missed seeing. “Orang tua mudah lupa” - Malay for Oldies are forgetful”

Besides cooking oil, Putrajaya heavily subsidises RON 95 petrol. A cabinet minister tweeted the market price per litre of RON 95 petrol is actually RM4.52. But thanks to our nice PM who wants to curb inflation, every Joe Dick & Harry ( or in Bolehland I mean it's Ali Muthu and Chong) can get it at the heavily subsidised price of RM2.05 per litre. Thank you, Sir for caring about the rakyat. (Malay for the hoi polloi)

At the petrol station (gas pump for Americans) I think but cannot be 100% sure you can pump as much subsidised petrol as you want for your two or three cars. Or if you are a "Orang Atas" (Malay for the People At The Top) your 4 or even 5 gas guzzlers. Currently, the government subsidises RON 95 petrol at a rate of around RM2.50 per litre, which has been sold at the ceiling price of RM2.05 per litre since February 2021, said a former ( you know who) PM.

So someone of the Top20% income group who refuels their vehicle with 50 litres of RON95 petrol gets a subsidy of RM125 for that volume of fuel purchased. So if you have a gas guzzler and pump 50 litres of RON95 per fortnight, the government is effectively putting RM3250 per year in your pocket. Multiply that RM3250 by the number of cars you own.

Does it make sense to you, dear reader, that the better off middle 40% and upper 20% face no quotas on how much subsidised petrol they pump into their two or three cars while the bottom 40% (who presumably are not rich enough to own more than one car) are subject to quotas on cheap cooking oil ?

It doesn't make economic sense to me. Why should subsidies intended for the less financially well off - I mean the B40 group- end up mostly benefiting the comfortably well off M40 and T20 groups. Did someone Atas not listen to the bureaucrats in MOF that the petrol subsidy was regressive?

Post Script

I accidentally left my smartphone at the supermarket checkout counter. When I returned 15 minutes later, the cashier (that moments earlier scolded me earlier for taking one too many subsidised cooking oil bags ) handed me back my smartphone. I thanked him and my lucky stars there are still honest people left in Bolehland.
According to Reuters, spending on subsidies will reach RM77bn in 2022. Malaysia is projected to spend 51 billion ringgit on consumer subsidies including for fuel, electricity, and food, assuming that commodity market prices remain at current levels. The government will also distribute 11.7 billion ringgit in cash aid, and 14.6 billion ringgit in other subsidies.
Media reports abound of subsidised cooking oil at RM2.50 per kg being repackaged and sold at much higher prices locally or smugglers taking cheap subsidised cooking oil to Thailand for sale.

#khairyjamaluddin #RON95 #cookingoil #subsidies