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2008-11-18

Government has been effectively collecting taxes instead on petrol consumption

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad revealed today the government has stopped subsidising petrol since Nov 1 and has been effectively collecting taxes instead on petrol consumption.

Speaking to reporters in Parliament, he explained that even after the 15-sen drop today, which saw RON97 petrol dropping to RM2 per litre, and RON92 and diesel down to RM1.90, the government was no longer subsidising petrol at the pumps.

"Even if prices return to RM1.92, we will still have a bit of surplus," he said, adding that subsidies had disappeared once the global price of oil had dipped under US$65 per barrel.

Current prices are hovering at US$55 per barrel.

As oil companies take a 19-sen cut and fuel station operators take 12 sen, it can be inferred that the cost price of RON97 petrol is currently below RM1.61 if the government can still generate income at RM1.92.

Shahrir explained that the difference between petrol pump prices and the cost plus commission for the companies and operators was being returned to the government effectively as a form of tax.

This gels with the 2009 Budget winding-up speech by Finance Minister Datuk Seri Najib Razak where he claimed a projected RM7 billion savings in fuel subsidies will be utilised to stimulate the troubled economy.

The statement was puzzling as the government had earlier said it would maintain a 30-sen fuel subsidy to keep pump prices below market prices.

Shahrir also projected that with RM21 billion budgeted for fuel subsidies in 2009 and subsidies for 2007, when prices had averaged US$65 per barrel, amounting to RM8.8 billion, savings from fuel subsidies would be far more than RM7 billion.

"If crude oil stays under US$60 per barrel, I am expecting at least RM10 billion," he said.

He also added that subsidies for diesel and natural gas are still in place.

Shahrir, however, explained that this did not mean that the people were not being helped by the government.

"We are still giving the RM625 road tax rebate for cars and RM150 for motorbikes that goes straight into your pocket," he said, referring to the rebate announced when RON97 shot up to RM2.70.

"So the rebate is for when the people suffered for about three months," he said.

The Johor Baru MP had called a press conference to announce that a total cost of RM21.4 billion had been incurred by the government up to October this year due to tax exemptions and subsidies for fuel against RM16.2 billion last year.

This, however, is without tax exemption figures for October 2008.

He also said that government would consider a floor price for fuel.

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