Akmal Azhar
Longstanding Blanket Subsidy Model
Malaysia has long maintained a blanket subsidy for RON95 petrol, keeping pump prices low at around RM2.05 per litre. However, this system, costing the government approximately RM20 billion annually, has been widely criticized for its inefficiency.
About 40 percent of the subsidy is enjoyed by the top 15 percent income earners and foreign nationals. Prime Minister Datuk Seri Anwar Ibrahim has argued that such a system is unsustainable and unfair, stressing the need for a more targeted and equitable subsidy framework.
Targeted Subsidy Implementation in 2025
During the 2025 Madani Budget announcement, Anwar declared that petrol subsidies would shift to a targeted system starting mid-2025. The government plans to implement a two-tier pricing structure where high-income individuals and non-citizens will pay market rates, while 85 percent of Malaysians in the lower- and middle-income brackets will continue to enjoy subsidized rates.
This targeted move is expected to save up to RM8 billion annually, with RM12 billion still allocated to subsidize petrol for eligible citizens. Anwar emphasized that 85 to 90 percent of the population would not be affected by the change.
Mechanism and Digital Verification System
Finance Minister II Datuk Seri Amir Hamzah Azizan explained that the subsidy mechanism is still under technical refinement and is expected to be officially announced after Q1 2025.
The system is likely to utilize MyKad identity verification and e-wallet platforms to ensure only eligible Malaysians benefit. The earlier rollout of the targeted diesel subsidy (SKDS 2.0) in June 2024 offers promising results—saving RM600 million per month and significantly cutting down on commercial diesel sales.
Challenges in Execution
However, the targeted petrol subsidy is not without challenges. Fuel station operators and consumer groups have raised concerns about the readiness of digital infrastructure, especially in rural areas where access to technology may be limited. Anwar acknowledged these obstacles and assured that the government is committed to building a reliable system before full implementation.
New Cost of Living Measures
On July 23, 2025, Anwar announced additional measures to ease the rising cost of living. Every adult Malaysian citizen will receive a one-off cash handout of RM100 starting August 31. He also pledged that the subsidized price of RON95 would be maintained at RM1.99 per litre for citizens under the new system, while foreign nationals would pay the full market price.
Economic and Social Impact
This reform signals the government’s serious intention to revamp the national subsidy structure in a fair and sustainable manner. Beyond just easing fiscal pressure, Anwar’s approach ensures that assistance reaches those who truly need it. If executed effectively, the targeted subsidy model could serve as a benchmark for future reforms—benefiting the economy while safeguarding public welfare.
Zakirin
