PADU Will Reduce Fuel Subsidies By RM6 Billion This Year - Maybank IB

Prime Minister Datuk Seri Anwar Ibrahim launched the Central Database Hub (PADU) with the goal of distributing subsidies fairly. By enabling "means-testing" eligibility based on net disposable income, PADU will contribute to the effort to reduce fuel subsidies by RM6 billion this year.

According to Maybank Investment Bank (Maybank IB), social assistance and other subsidies can be more easily targeted by making better use of PADU, which combines socioeconomic data from a variety of ministries, federal agencies, state governments, and statutory bodies. In place of the existing monthly household income classifications, the government has been examining a number of options for "means-testing" eligibility for targeted subsidies, according to the bank's "Malaysia 2024 Outlook and Lookouts" report.

The study stated that they are dependent on three factors: household net disposable income, individual net disposable income, and targeted subsidies for the eligible recipients to be given in "cash" through a combination of social protection and social assistance schemes; additionally, "subsidy cards" will be issued to qualifying households and individuals based on their net disposable incomes.

The "subsidy cards" are a non-cash option that distribute a quota (for example, in liters per given period) for subsidised fuel to eligible recipients. We assume that the above "cash" options will be used to offset inflation and the impact of changes in the cost of living resulting from adjustments in the prices of the subsidised fuel, the institution said.

The bank also stated that in order to improve the current cash handouts, welfare, social protection, and safety net programs with the goal of addressing exclusion/inclusion errors, abuses, and leakages, PADU usage can be optimized to facilitate the targeting of additional subsidies and social assistances.

"By reaching the intended and the deserving, (it can) ultimately ensure the biggest bang for the buck in the government budget for subsidies and social assistance," the statement stated.

According to Maybank IB, this could result in the elimination of subsidies on necessities and their replacement with extra financial offsets or cash handouts. It could also enhance and streamline a number of welfare, social protection, and safety net programs.