Any plan by the government to revamp the fuel subsidy mechanism that involves a targeted subsidy will be “too harsh” and can dampen consumer confidence further, the MCA cautioned today.

MCA vice-president Chua Tee Yong ( right ) said consumers were already impacted by the last fuel subsidy adjustment of RM0.20 and a 15 percent hike in electricity tariff , and as such, the reported plan to introduce a new fuel subsidy mechanism by September would be “too sudden and too fast”.

“It (price hikes) also caused the consumer sentiment index to fall below the 100-point threshold in almost five years to 82.4 points and the Business Condition Index slid to 92 points, according to the Malaysian Institute of Economic Research, citing concerns of inflation and sluggish domestic demand,” Chua said in a statement today.

He was referring to a report by a Chinese daily that said the government was finalising details of a new system , to be rolled out in September in which those who earn below RM5,000 a month and with vehicles with an engine capacity of less than two litres would be eligible for subsidied fuel.

The daily also claimed that those earning between RM5,000 to RM10,000 monthly would be limited to 300 litres of subsidised RON95 petrol and diesel.

Chua said if true, the “inflationary impact” could be triple that of the previous subsidy revamp carried out by the government.

Report 'mere speculation'

While the Labis MP said efforts by the government to target fuel subsidy allocation are “essential and commendable in the long term”, these must not be introduced too soon.

“Thus, there is concern that the adjustment would be too harsh to the consumers, especially the lower and middle income group and small and medium enterprises (SME), especially when the detailed implementation mechanism is still not disclosed and in view of the implementation of the oods and services tax in April 2015,” he said.

Chua urged the government to gather feedback from the relevant stakeholders and consider options, such as gradual rationalisation of subsidies over a fixed period to the market price, in order to accord consumers and SMEs time to prepare.

Yesterday, Bernama reported that the government denied the Chinese press report, dismissing it as mere “ speculation ”.

Even so, Domestic Trade, Cooperatives and Consumerism Ministry secretary-general Alias Ahmad admitted that there would be a new approach to petrol and diesel subsidies, and that an in-depth study was being conducted.

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