The government has just announced that petrol price will go up by 78 sen at midnight – a 40.6 percent jump from RM1.92 per litre to RM2.70.
“Effective from tomorrow, June 5, 2008, the price of petrol will be raised by 78 sen and the price of diesel will be raised by RM1,” Prime Minister Abdullah Ahmad Badawi told a press conference.
The price of diesel will go up RM1, or 63.3 percent – from RM1.58 per litre to RM2.58.
The price hikes are among government measures to cut the spiralling bill for oil subsidies, which is expected to amount to RM56 billion this year.
At a press conference held at 5.30pm, Abdullah also announced that the government plans to offer rebates to motorists to offset the fuel price increase.
Under the scheme, vehicles below 2000cc will receive a RM625 rebate annually – to compensate for 800 litres of fuel used under the new price.
“Owners of private motorcycles of engine capacity of up to 250cc will be paida cash rebate of RM150 per year,” he said.
The money will be paid by postal order. Rebate will be paid when motorists renew the road-tax for their vehicles.
The government is expected to save RM4 billion under this new subsidy restructure.
However, the government is slowly expected to head towards totally abolishing the fuel subsidy.
If petrol is to be sold at full market prices, it could be as high as almost RM4 a litre – about 50 percent above current levels.
Since 2004, petrol has gone up by 97.1 percent, while diesel increased by a whopping 231 percent [see chart below].
Higher TNB tariffs
Abdullah also announced that the road tax for vehicles above 2,000cc will be reduced by RM200.
For motorbikes above 250cc, their road tax will be slashed by RM50.
The diesel subsidy for fishermen will be fixed at RM1 per litre while vessel owners will have to pay RM1.20 per litre.
The premier also announced a price hike in gas supply for electrical and industry sectors.
The premier further said that the electricity tariffs too would be increased.
He added that the power tariff rate would remain the same for households which use about 200 kilowatt of electricity, which would be RM43.60.
Any usage beyond this would fall under the new price which will be announced by power supplier Tenaga Nasional at a press conference tomorrow.
The prime minister also urged Malaysians not to organise street protests against the fuel hikes.
Expect more increases
Abdullah said that under the new scheme, the government will maintain a 30-sen fuel subsidy, which is independent of the market rate of fuel prices.
For example, if the market rate is RM3 per litre, the local pump price would be RM2.70 per litre with the 30-sen subsidy.
He said that the government would review the market price on monthly base and announce the subsidised price accordingly.
Abdullah also said that he was confident the economic growth could be maintained at five percent and inflation at four to five percent.
Domestic Trade and Consumer Affairs Minister Shahrir Abdul Samad, who was also at the press conference, conceded that the increase would impact on inflation, which came in at 3.0 percent in April.
“With this hike, the CPI (consumer price index) is expected to rise to 5.0 percent” this year, he said.
He also said that the new price of RM2.70 did not reflect the full market value, which could be as high as RM3-4 when the price controls are completely removed in August.
Also at the press conference were Deputy Prime Minister Najib Abdul Razak, Second Finance Minister Nor Mohamed Yakcob, Minister in the Prime Minister’s Department Amirsham Abdul Aziz, Information Minister Ahmad Shabery Cheek and International Trade and Industry Minister Muhyiddin Yassin.