KUALA LUMPUR, May 23 ― In the lead-up to implementing targeted subsidies including for fuel, the government will focus on ensuring the right execution mechanism is in place, Finance Minister II Datuk Seri Amir Hamzah Azizan said.

At the moment, the government is finetuning the mechanism to ensure that when it presses the button, it gets it right and actually serves the right groups, and the government actually gets enough saving incentives from the system as the subsidies stop, he said.

"(Fuel) subsidy rationalisation is required because the prices are so different among countries. We have leakages, we know we have leakages because the incentives are too wide. We have to change incentives within the country so that the people who deserve to get the subsidy, get it.

"But what we have to do is to execute subsidy rationalisation. The mechanism must actually be right. I think the government is now trying to finetune so that when it goes down the line it gets to the right target. Subsidy rationalisation will come, but we will not press the button if we have not got this thing sorted out,” he said during the recent @EY C-Suite Forum.

Amir Hamzah said diesel subsidy in Malaysia rings up a bill of RM1 billion every month for the government.

He said the disparity from market price has incentivised years of smuggling into neighbouring countries, and allowed large segments of the commercial sector to increase profits on the back of cheap diesel, which they are not eligible for in the first place.

"Losses due to leakages amount to approximately RM4.5 million per day. We should be reminded that blanket subsidies are unsustainable over the long run and need to be used as a tool to assist the most vulnerable groups in society.

"Hence the reforms must happen, and the Ministry of Finance is working closely with the relevant ministries on finetuning the mechanism to ensure that those who deserve subsidies will receive,” he said.

On Tuesday, Prime Minister Datuk Seri Anwar Ibrahim said the Cabinet has agreed to implement targeted diesel subsidy involving consumers in Peninsular Malaysia, adding that the targeted subsidy will not involve consumers in Sabah and Sarawak as it was used in nearly every family’s vehicle in both states.

"So, we will postpone any action (on targeted diesel subsidy for Sabah and Sarawak) as it will burden the people there,” he said during a live address to the nation broadcast by all local media channels on Tuesday night.

To curb drastic rises in prices of goods and services in the peninsula, however, the government will prepare subsidies for traders using commercial diesel vehicles, he said.

Anwar also said that the subsidy would involve 10 types of public transport vehicles and 23 types of goods transportation vehicles under the diesel subsidy control system. ― Bernama