KUALA LUMPUR, May 21 — Prime Minister Datuk Seri Anwar Ibrahim announced today that the Cabinet has approved the start of the diesel subsidy rationalisation programme, which is expected to save the government around RM4 billion a year.

He said that the initiative will initially target users in Peninsular Malaysia only and will not involve those in Sabah and Sarawak.

"The Cabinet meeting today agreed to implement subsidy rationalisation for fuel. The rationalisation will start for diesel fuel,” he said in a live address to the nation.

Anwar also announced several measures to ensure that this move will not result in an abrupt rise in the prices of goods and services.

This includes targeted diesel subsidies for commercial consumers, which cover bus and taxi operators.

The Subsidised Diesel Control System (SKDS) will include 10 types of public transport vehicles and 23 types of logistical vehicles, he said.

Anwar also announced that several groups will receive financial aid for eligible owners of private vehicles using diesel, such as small farmers, rice farmers, and small traders.

He said this method will ensure that the cash assistance will not benefit higher-income households.

The prime minister also said that the savings from this subsidy rationalisation programme will be channelled towards other public initiatives such as the Sumbangan Asas Rahmah (Sara) programme, which will now see RM700 million allocation — five times its initial allocation of RM130 million — and set to benefit 700,000 Malaysians at RM1,200 each.

Other initiatives include the increase of the Sumbangan Tunai Rahmah (STR) aid allocation which has been increased by 25 per cent to RM10 billion, benefiting 9 million Malaysians or roughly 60 per cent of the adult population.

Last month, Anwar said the government’s move to implement targeted subsidies is aimed at ensuring that the benefits are truly enjoyed by 80 to 85 per cent of the population.

He said the move also aims to prevent the wealthy and the estimated 3.5 million foreigners in the country from benefiting from subsidies.