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Malaysia begins diesel subsidy reforms, prices to rise by about 50% on Monday

KUALA LUMPUR (Reuters)—Diesel fuel prices in much of Malaysia are set to rise by roughly 50% on Monday as the government begins shifting away from costly blanket subsidies to a targeted approach that mainly helps the needy.

Malaysia, which heavily subsidises prices of fuel, cooking oil and rice among other basic items, has seen its subsidy bill rise to record levels in recent years amid surging commodity prices, straining government coffers.

Its diesel subsidy bill alone has risen 10-fold from 1.4 B ringgit in 2019 to 14.3 B ringgit in 2023. The government said last month its plan to cut diesel subsidies this year is expected to save about 4 B ringgit ($853.24 MM) annually, with the savings expected to be re-directed to low-income groups.

The Finance Ministry said in a statement on Sunday it will begin setting diesel fuel prices to align them with market prices. The retail price of diesel fuel will rise to 3.35 ringgit ($0.71) per litre starting at midnight at all petrol stations across Peninsular Malaysia, the ministry said.

It will remain at 2.15 ringgit per litre in Malaysian states and territories on Borneo, as well as for eligible logistics vehicles under the government's subsidized diesel control system.

Lower diesel prices have also been set for fishermen and land public transport vehicles such as school buses and ambulances, the ministry said.

The government will provide cash assistance to eligible Malaysian individuals owning diesel vehicles, as well as small-scale farmers and commodity smallholders to mitigate the potential impact on their incomes, the ministry said.

Despite the subsidy cuts, diesel prices in Malaysia will remain among the lowest in Southeast Asia, with the fuel retailing at the equivalent of 8.79 ringgit per litre in Singapore, 4.43 ringgit in Indonesia, and 4.24 ringgit in Thailand, the ministry said.

($1 = 4.6880 ringgit)

(Reporting by Rozanna Latiff; Editing by Kim Coghill)


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