Malaysia plans petrol price hike in August
Posted: 03 June 2008 0213 hrs

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KUALA LUMPUR: Malaysia is planning to hike its pump prices as part of a sweeping fuel subsidy reform package in August, a minister said on Monday.

"It will happen... petrol prices will increase, I think the idea is in August this year when the subsidy system is re-structured," Domestic Trade Minister Shahrir Samad was quoted as telling state news agency Bernama.

He earlier told reporters Malaysia had shut off petrol sales to Thais on its northern border on Monday and would also ban sales of petrol to visiting Singaporeans in the southern border state of Johor from June 9.

"This is a temporary measure, not a permanent one, and this will continue until the restructured... plan is announced," he said.

Malaysia is moving to cut the bill for its extensive petrol, diesel and gas subsidies, which Shahrir said are expected to cost 56 billion ringgit (17.3 billion dollars) this year.

The government is initially targeting Singaporeans and Thais who make day-trips across the border to fill their tanks with fuel that is substantially cheaper here.

Shahrir said that 296 petrol stations in the northern states bordering Thailand, and 197 in Johor state would be affected by the ban on sales to foreigners, which extends 50 kilometres into Malaysia.

"Most of these foreign vehicles come to our country just to fill up on petrol so there is no value added - a bona fide tourist would also spend money in the country," he said.

Shahrir said the new subsidies would be a needs-based system, rather than the current arrangement which lowers the cost of petrol for all users no matter what their income.

"Right now, the more you use the more subsidy you get and that doesn't sound like a subsidy system," he said.

Despite the urgent need to lower the subsidy bill, the government is braced for a public backlash over any further increase in a country where public transport is poor and many people are dependent on their cars.

The ruling coalition suffered its worst ever result in March 8 elections, losing five states and a third of parliamentary seats in a setback partly credited to anger over high prices of food and fuel. - AFP/de