The government will implement a floating diesel price mechanism alongside targeted diesel subsidies to curb fuel subsidy leakages, which have become increasingly prevalent.
Finance Minister II Datuk Seri Amir Hamzah Azizan said the diesel subsidy, which amounted to RM1.4 billion in 2019, surged tenfold to RM14.3 billion last year due to several factors.
He highlighted that the consumption of subsidised diesel rose from 6.1 billion litres in 2019 to 10.8 billion litres last year, marking an approximate 70 per cent increase, which he believes is due to significant leakages.
He noted the disparity between the retail price of diesel at RM2.15 per litre and the market price of approximately RM3.50 per litre, which some parties exploit for profit.
Additionally, the fuel price differences with neighbouring countries, such as Thailand (RM4.12 per litre), Indonesia (RM4.73), and Singapore (RM8.87), create opportunities for fuel smuggling from Malaysia.
He added that reducing the gap between retail and commercial prices would prevent parties from profiting off subsidised diesel.
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