Govt’s fuel quota ‘U-turn’ economically sensible, says economist

The Malaysian government's decision to reduce the BUDI95 fuel quota in April before restoring it this month may appear to be a political shift, but it can be justified economically, according to economist Tan Peck Leong from Universiti Teknologi Mara. Tan explained that the April quota reduction coincided with high global oil prices, making it costly for the Treasury to maintain subsidised RON95 at RM1.99 per litre.

While the government did not remove the subsidy or increase the price, limiting the maximum volume of subsidised petrol to 200 litres per month for each individual was economically reasonable. Consumption data showed that fewer than 1% of BUDI95 users consumed more than 200 litres a month, while the average usage was around 100 litres.

If 1% of the 16 million BUDI95 users had used the extra 100 litres in April, it could have added approximately RM36.5 million to the government's expenses that month. Restoring the 300-litre quota could cost an additional RM29.3 million per month—around RM7.2 million less than in April. Tan emphasized that the quota restoration did not mean Malaysians suddenly consumed more fuel; rather, the additional 100 litres served as a buffer for occasional long-distance journeys or high-use months, particularly in rural East Malaysia.

The distinction lies in the efficiency of 200 litres from a fiscal perspective and the psychological comfort provided by 300 litres. Political analyst Syaza Shukri of International Islamic University Malaysia suggested that the reduction and restoration did not necessarily constitute a U-turn, as the government could explain the reasons behind both decisions.

She noted that the timing of Anwar's announcement, ahead of the general election, made it easier for opponents to portray the move as a pre-election strategy. However, both the reduction and restoration served valid purposes, providing public confidence while addressing fuel affordability concerns. For future quota adjustments, Tan recommended clearer rules linking them to oil prices, subsidy costs, or overall monthly subsidy bills.

Such transparency would make the policy more predictable and less susceptible to political perceptions.