KUALA LUMPUR : With oil prices near record highs, Malaysia could cut subsidies for higher grades of petrol in order to keep prices down for middle income groups and the poor, reports said on Sunday.

The government expects to spend 35 billion ringgit (10.7 billion dollars) on fuel subsidies this year if oil stays around 100 dollars per barrel, and has already indicated there would be some cuts ahead.

Consumer Affairs Minister Shahrir Samad was quoted saying the bulk of the subsidies would go for a new octane 95 fuel for use in most vehicles, while a higher octane petrol for luxury cars and SUVs would get less state support.

According to the New Straits Times, Shahrir said the government would save costs by mainly subsidising only one type of fuel. It currently subsidises two types, octane 92 and octane 97.

"The goal is to have subsidies targeted and more focused at those who need it, such as the lower and middle-income group, and giving a choice to the rich on what petrol they want to fill in their tanks," he said.

"The system is a shift in how we price petrol, but it is necessary if we are to lessen the burden on the lower and middle-income groups," the paper quoted him as saying.

Malaysia imposed its highest-ever fuel price rises in February 2006, citing the spiralling cost of crude oil. The move was condemned by political and civil groups, arguing it was unnecessary as the country is a net exporter of oil.

The central bank recently said that rising prices of fuel, commodities and food will see headline inflation for the year rise to 2.5-3 percent from 2.0 percent in 2007. - AFP/de