No More Cheap Fuel For T20? Economists Suggest Cutting Them From BUDI95 To Save RM1.5B

The days of blanket fuel subsidies in Malaysia may be numbered. As the government grapples with rising fiscal pressures and a volatile global energy market, economists are now calling for a major shake-up of the BUDI95 subsidy scheme.

The proposal is simple but significant: Exclude the T20 income group from RON95 subsidies to save the country billions every month.

The RM1.5 Billion Question

According to Ahmed Razman Abdul Latiff of Putra Business School, the current subsidy structure allows high-income earners to benefit disproportionately from government spending. He points out that the T20 group currently accounts for over 30% of RON95 consumption.

With Putrajaya spending approximately RM5 billion a month on RON95 subsidies, removing the T20 from the equation could result in immediate savings of RM1.5 billion per month.

Why Target the T20?

The argument for a more targeted approach isn't just about the numbers; it's about the type of vehicles being fueled. Bank Muamalat chief economist Afzanizam Abdul Rashid noted that high-income users typically drive high-powered vehicles that consume significantly more fuel than the cars driven by the B40 and M40 groups.

By limiting BUDI95 to those in need, the government can:

• Manage the Cost of Living: Ensure subsidies reach the vulnerable groups most affected by inflation.
• Ease Fiscal Pressure: Address the country’s financial constraints amid an "uncertain global environment".
• Buffer Against Global Crises: Protect the national budget from price spikes caused by ongoing conflicts, such as those impacting the Strait of Hormuz and global energy supplies.

Read: Safe Passage at Hormuz: Why Malaysia’s Special Deal with Iran Won't Lower Your Petrol Price

A "Quota" Instead of a Ban?

While some suggest a total exclusion of the T20, other experts propose a middle ground. One suggestion involves maintaining the subsidy for the high-income group but imposing a lower monthly quota compared to the B40 and M40 categories. 

This would follow international precedents, as World Bank and IMF studies show that rationalized subsidies for higher-income groups are entirely implementable.

Read: Bye-Bye RM1.99? Why Your Petrol Subsidy is Now a 'Timed' Reality

What the Government Is Saying

Prime Minister Anwar Ibrahim has recently acknowledged the mounting pressure of the cost of living. However, he emphasized that any response must be "targeted and measured," admitting that the country's financial constraints mean not all issues can be fully resolved at once.

Read: Is It Illegal To Borrow Your Parents' MyKad For Subsidised Petrol? Here’s What The Law Says

How to Prepare

2026 Toyota Vellfire HEV: Luxury meets fuel efficiency, perfect for staying ahead of targeted subsidy shifts.

As the conversation around subsidy rationalization gains momentum, Malaysian drivers, especially those in the T20 bracket, should prepare for a potential shift in pump prices. Whether it is through a total exclusion from BUDI95 or a reduced quota, the era of "one-size-fits-all" fuel subsidies appears to be coming to an end.

Read: Why Is Global Oil Falling But Our Petrol Price Is Still High? — MOF Explains The 'Lag'

Source: FMT