Time to abolish fuel subsidies and tolls?
Malaysia’s dual system of heavily subsidising RON95 petrol while simultaneously extracting tolls on the nation’s expressways represents one of the more conspicuous policy contradictions of recent decades. Eligible citizens currently pay RM1.99 per li...
The Malaysian government currently heavily subsidizes RON95 petrol at RM1.99 per litre under the BUDI95 scheme, while tolls on expressways range from RM2 to RM3.50 at various locations. This creates a paradox, as the total monthly cost for subsidised fuel and tolls for a typical commuter between Keramat and Petaling Jaya is around RM200.
The government should consider abolishing these subsidies and tolls in one coordinated effort. Ending the subsidies and redirecting the savings to compensate toll concessionaires, who are often government-linked companies, would eliminate inefficiencies. Once compensated, the toll plazas would be removed, and expressways would revert to being public infrastructure funded through general taxation.
Eliminating subsidies would free up budget resources to retire contingent liabilities associated with toll concessions, reducing the need for further borrowing. The move would also eliminate administrative costs related to subsidy distribution and toll regulation. Higher pump prices would signal the true social cost of driving, encouraging carpooling, public transport, and remote work.
This shift would align with the government's preference for electric vehicles, as higher fuel costs would make EVs more economically viable. Critics may argue that the abolition would be regressive, but the current system is regressive in subtle ways, benefiting higher-usage middle-class households while providing little direct benefit to the poorest Malaysians.
A clean abolition, coupled with transparent cash transfers or expanded public transport investment, could be more progressive. Politically, the move requires courage, as successive administrations have preferred gradual adjustments and deferred toll hikes. Returning roads to free use would also eliminate indirect economic costs embedded in logistics and retail prices.
The concessionaires, being largely government-linked, are not independent private parties and can be integrated into the reform process. Ultimately, abolishing both the fuel subsidy and toll regime would reduce fiscal pressure, restore price signals, encourage efficient mobility choices, and advance the EV agenda. The roads would function as public goods once again, disciplined by real resource costs rather than cross-subsidies.
Written by urgent.news from The Vibes's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
