A think tank has praised the government’s move to implement targeted subsidies for fuel.
Nevertheless, according to Carmelo Ferlito of the Center for Market Education, Putrajaya lacked the expertise necessary to carry out such efforts on a large scale.
He said the purpose of the government implementing targeted subsidies was to “determine whether and how targeted subsidies work.”
The government will be able to find any kinks by applying the targeted subsidies gradually, said Ferlito.
According to FMT, Ferlito said “It is an unexplored territory, so it makes sense to start small, fine-tune the system and then move on to a bigger scale when we are sure that the system works,”
Ahmad Maslan, the Deputy Finance Minister, stated yesterday that the government was developing a system to deliver targeted fuel subsidies and that it was a “sensitive” matter. Putrajaya anticipated a proposal for the system to be finished in the second half of the year, but no deadline for implementation had been specified.
It made sense to start with diesel, according to Yeah Kim Leng of Sunway University, because it already had targeted subsidy mechanisms in place that worked well to lessen the impact on the economy and society.
A gradual approach would allow for the rationalization of petrol subsidies. It would be less disruptive to the economy, according to Yeah, a group member established to advise the Prime Minister.
He claimed that implementing targeted diesel subsidies would have more advantages than disadvantages, particularly for school buses and transportation companies since it would lessen the negative economic and social effects of rising fuel prices.
“Businesses will bear higher cost pressures, but as long as the price increases are gradual, the extent of cost pass-through to consumers will depend on the prevailing economic and financial conditions,” he said.
Yeah and Ferlito advised against introducing targeted subsidies for petrol and diesel concurrently.
Yeah recommended introducing fuel subsidies gradually to give families and businesses time to adjust their consumption and production habits to price changes and market conditions.
