The days of cheap fuel for Thai vehicles filling their tanks across the southern border could soon be over as the Malaysian government is preparing to float diesel prices, probably this year.
The move aims to end border leakage and is in line with Prime Minister Anwar Ibrahim’s decision to cut fuel subsidies to strengthen his government’s fiscal position.
Second Finance Minister Amir Hamzah Azizan said the plan to float diesel prices would reduce fuel outflows to neighbouring countries to tap the advantage from the difference between local and Malaysian prices, the Bernama news agency reported on Friday.
The budget poured into supporting support cheap diesel in Malaysia jumped from 1.4 billion ringgit in 2019 to 14.3 billion ringgit last year. The jump reflected rising diesel consumption, from 6.1 billion litres in 2019 to 10.8 billion last year.
The minister said the jump could stem from diesel leakage to other countries. “We believe this surge is due to significant leakages,” the Malaysian news agency quoted him as saying.
Amir Hamzah said the new initiative could take effect this year.
The price difference between Malaysia and neighbouring countries including Thailand lures drivers to fill their tanks in Malaysia and entices smugglers to take advantage of the gap as well.
“To reduce the leakages, the most logical solution is to float the price,” said Amir Hamzah Azizan.
The retail diesel price in Malaysia is 2.15 ringgit (about 17 baht) per litre compared with the Thai price of 33 baht, following a 50-satang increase on Friday. Thailand’s Oil Fuel Fund has also run up big debts — 111 billion baht as of this week — subsidising fuel prices, mainly diesel and cooking gas.
Malaysia’s other neighbours also pay far more for diesel than Malaysians. The price per litre in ringgit terms is 4.37 in Indonesia and 8.87 in Singapore.
The Malaysian minister did not mention plans to end or reduce subsidies for other types of fuel.
Malaysia tries to prevent foreign vehicles from Thailand from taking advantage of its cheap fuel prices, and Singapore has implemented its own measures to deter its motorists from buying fuel in Malaysia.
The Regional Customs Bureau 4 based in Songkhla, which is in charge of the border with Malaysia, has warned Thai motorists of punishment from Malaysian authorities as Malaysia allows Thai vehicles to buy any kind of fuel, but only up to 20 ringgit, to prevent profiteering.
Singapore requires its vehicles entering Malaysia to have fuel tanks that are at least three-quarters full.
Mr Anwar said on May 21 that subsidy cuts could be re-directed to the needy, including cash assistance to eligible owners of diesel vehicles such as paddy farmers and small traders, according to Reuters.
“I caution that any targeted subsidy should not burden the majority of the people,” he said in a televised address.