The Domestic Trade Minister, Dato ‘Ismail Sabri Yaakob, recently announced new dual price levels for petrol to take effect from May 1 this year. Under the new system, the retail prices of petrol will be based on free market price for high powered vehicle engines and a subsidized price for owners of low-powered cars . Thus, the price of RON 95 will likely remain at RM1.80 for subsidized petrol and RM2.10 for petrol without subsidy, meaning the rate of subsidy is 30 cents per litre.
The government has also earlier announced a new coupon system under a subsidy scheme for low income rice consumers, including the hardcore poor families. This will replace the existing rice subsidy scheme for Beras Nasional 15%.
What doesn’t appear right in these two cases is a shift further in the government administration of the subsidy scheme in favour of intricate measures which have been avoided during Tun Mahathir or even Pak Lah governments.
During the Tun Mahathir era, rice and Petrol subsidies were given to all. Although these benefitted unintended parties, at least it spared the government of having to take intricate and costly measures to administer, monitor and enforce such a system.
For instance, in a coupon or differential price system, it may be necessary for the government to keep track on the income level of consumers to identify who are eligible. Later coupons have to be printed and distributed efficiently to eligible people only. How does the government ensure that only rightful persons get the coupons and no fake coupons are distributed. And further an elaborate system of monitoring and enforcement has to be instituted, and this will require additional manpower that should better be deployed to more productive sectors.
The use of Mycad to monitor sales of Petrol may be feasible to cover most of the consumers, and thus simplifying the process, but how does the system take care of sales to expatriate local residents or sales to company owned vehicles?
While the Najib administration is undertaking measures to deregulate the economy and make it more efficient by liberating certain sectors and more recently by introducing The New Economic Model, the introduction of an elaborate subsidy scheme should not at all be on the agenda. This is because, while the other measures are meant to create an efficiently running economy in line with 1 Malaysia concept, an elaborate subsidy scheme is nothing more than a regressive measure that will create new regulations and enforcement efforts that will distract the nation’s attention away from important agenda to achieve developed nation status.
The policy makers in the government should know how difficult it is to administer different price structure in the same economy. It will become the breeding ground for black market and corruption.
Indeed, such measures as the proposed rice coupon system should only be considered during emergency or in time of war.