The latest cut in the diesel subsidy may result in small lorry operators - already facing stiff competition from big players that receive preferential treatment - in being squeezed out of business.

"Our direct costs have become very high as a result of the subsidy reduction. It has become too difficult to make a decent living from the transportation industry, primarily because the government has refused to help us. Our profits don't even reach five percent,"said Pan-Malaysian Lorry Owners Association (PMLOA) committee member Foo Tin Fuan.

On Thursday, diesel subsidy for commercial users in eligible sectors - covering land transportation and fisheries - was reduced by seven sen, bringing the subsidy down to 30 sen.

Foo said today that this tops a number of factors that are affecting lorry companies - the first being that container operators are allowed to compete with them in transporting cargo.

Unfair conditions

Container operators now only pay for the kerb weight of their prime-movers, which works out to about RM100 per year, compared to the road tax of RM572 per month levied on lorries for weight and tonnage of 36 tonnes (40-foot vehicles).

"On average, we pay about RM5,000 to RM6,000 more than container companies, and yet they are granted tax exemptions to purchase of new haulers," Foo said.

"It seems that a preferential advantage is being given to create one-stop transport centres out of container companies, but at our expense."

PMLOA said container operators should not be allowed to transport general cargo in the first place, since this contravenes the Commercial Vehicles Licensing Board Act 1987.

It proposed instead that the government level the playing field and make container licences available to all operators.

The other main issue linked to rising diesel prices, said Foo, is that smaller lorry companies will be the first to be squeezed out of the sector.

Larger lorry operators - those owning 15 or more vehicles - are not expected to be affected by the price hikes because, according to Foo, the government gives them an additional three sen subsidy.

PMLOA members had absorbed all seven separate diesel hikes since 2000, without revising their service charges.

Due to the 'discriminatory' government policies and intensified competition, members will have no choice but to absorb the latest price increase as well, Foo said.

At the same time, lorry companies are prevented from sourcing business overseas, such as in Singapore, because of duty charges.

"We have been submitting memoranda to the Transport Ministry on an annual basis, but no solution has resulted from these meetings.

He warned that if the government continues to apply separate rules for lorry companies, their businesses may fold with the rising diesel costs.