Fuel hike: Gov't reliefs 'inadequate'

An economist has urged the government to formulate new strategies beyond the reliefs announced on Wednesday to tackle the wider impacts following the hefty hike in fuel prices.

“The reliefs are provided, although not complete. They are targeted at car owners but there are wider impacts on all goods and services,” Dr Yeah Kim Leng, the group chief economist at rating agency Ram Holdings Bhd, said when contacted.

“The government has to come out with new strategies to manage the inflation,” he urged, adding that the drastic increase set to reduce people’s purchasing power would result in higher inflation rate.

Yeah was asked to comment on the relief measures the government unveiled on Wednesday following the announcement of the hike in petrol prices.

Yesterday, petrol price went up by 78 sen - a 40.6 percent jump from RM1.92 per litre to RM2.70.

The diesel price was also hiked by a whopping 63.3 percent - from RM1.58 per litre to RM2.58.

The price hikes are among government measures to drastically cut the spiralling bill for oil subsidies, which is expected to amount to RM56 billion this year.

'We shouldn't get unduly worried'

To offset the fuel price increase, Prime Minister Abdullah Ahmad Badawi said the government will offer cash rebates to motorists, where vehicles below 2000cc and private motorcycles of up to 250cc will receive an annual rebate of RM625 and RM150 per year respectively.

The road tax for vehicles above 2000cc meanwhile will be reduced by RM200 and motorbikes of above 250cc will be slashed by RM50, but a minimum rate of RM2 road tax will be maintained.

On the cash rebates, Yeah said it will only help to offset the fuel price increase for low users, but not on the high users who will have to pay more.

“(It’s a move) to try to lower the fuel consumption and lead to a change in lifestyle,” said Yeah, who himself is considering to commute by train from his Seremban home to work in Kuala Lumpur after yesterday’s hike.

On the hike, Yeah described it as a “significant jump” but said it was necessary to ensure the fiscal deficit will not balloon out of control because of the escalating world oil prices.

He added that it was also a right move from an economic viewpoint to move towards economic stability and to reduce the imbalances.

“However, society will have to cope with the rising prices, the impact on reducing consumers' real income because of the higher prices and the knock-on effects which will lead to the inflationary effects,” he cautioned, while urging the government to address these issues.

“(Nevertheless,) Malaysia is in a relatively better position to cope with this, so we shouldn’t get unduly worried,” said Yeah.

The drastic hike has prompted the public anger and a round of criticisms from the opposition as “socially unjust”, while several street demonstrations are anticipated to be held in coming weeks.