Consumers paying more than full cost

updated 12.10pm The government may dump its petrol subsidy scheme altogether as consumers are already paying more than the full cost at the pumps at current price level.

Domestic Trade and Consumer Affairs Minister Shahrir Samad yesterday revealed that the government no longer need to subsidise petrol with the drastic fall in global oil prices.

The government on Tuesday cut pump prices by seven percent to RM2 per litre as global crude prices continued to ease. The price of diesel was also reduced by 15 sen to RM1.90 per litre.

"We have stopped subsidising petrol from the time when the pump prices were cut to RM2 per litre," said Shahrir.

He said that at current prices, the government is making about 30 sen per litre.

"At about US$60 per barrel we are already making money," he told AFP.

Shahrir said the government was still handing out direct subsidies in the form of cash rebates for motorists of RM625 per year and that diesel and liquefied petroleum gas (LPG) were still being subsidised.

"The rebate system is still being enforced... but it will runs its course until March next year before we either stop it or implement a new system," he said.

Gov't Makes Money Even At RM1.92 Per Liter

Tuesday's cut was the fifth the government has announced since a 41 percent hike in June as the price of crude soared, sparking angry street protests and calls for Prime Minister Abdullah Ahmad Badawi to resign.

Shahrir said the government will decide by the end of the month if subsidies will be reinstated if crude oil prices go up again.

It will also consider setting a floor price of RM1.92 per litre.

"I would be happy to have a floor price of 1.92 ringgit. This would allow the government to earn some revenue and it is also easier to manage the price," he said.

"It is also a better option because we can use the savings for development or to reduce the deficit."

The government earlier this month announced a RM7 stimulus programme - reaped from savings on reduced oil subsidies - to boost the economy amid the global slowdown.

But the additional spending saw the government widen its budget deficit forecast for 2009 to 4.8 percent, from 3.6 percent predicted in August.

Meanwhile, Penang Chief Minister Lim Guan Eng said petrol price should have been RM1.62 per liter.

"This was proposed by an economics professor from Universiti Utara Malaysia associate professor Abdul Rahim Anuar on Nov 13, who said that a correct price of RM 1.62 should be set to reflect prevailing low market price of oil.

"For this reason, the federal government should reduce the price of petrol further to RM1.62 per liter so that the people need not pay extra and at higher price than the open market to benefit the few at the expense of the many."