Malaysia considers cash handouts as fuel hike looms

Prime Minister Abdullah Ahmad Badawi is expected to announce the reforms on Wednesday in a move that could double Asia's second-cheapest pump prices.

Malaysia considers cash handouts as fuel hike looms
Malaysia may replace fuel price controls with cash handouts for motorcyclists and owners of small cars as part of subsidy reforms expected to be announced later on Wednesday, a newspaper reported.

Prime Minister Abdullah Ahmad Badawi is expected to announce the reforms on Wednesday in a move that could double Asia's second-cheapest pump prices. The government has said it plans to start using global market rates for fuel in August to prevent subsidies from eating up a third of its budget.

"These proposals will see inflation go up by 1 percent and reduce the gross domestic product by 0.5 percent," the pro-government New Straits Times newspaper reported on its Web site without identifying the source of the information.

Apart from pushing up inflation, already at 15-month highs, a fuel price hike could stoke public anger against Abdullah at a time when he is trying to arrest a slide in public support for the government and fend off a challenge to his leadership.

A cabinet committee on inflation has asked the government to give cash handouts to motorcyclists and owners of small cars and suggested measures including allowing dominant power distributor, Tenaga Nasional Bhd , to raise electricity tariffs in all of Malaysia expect the provinces on the island of Borneo.

Other proposals include imposing additional taxes on independent power producers and palm oil millers and a gradual cut in gas subsidy to the power industrial sector.

The cabinet held its weekly meeting on Wednesday morning.

Abdullah's office said he would hold a news conference at 0900 GMT on Wednesday.

In Asia only Myanmar has slightly lower pump prices than Malaysia, although sales in Myanmar are rationed to two gallons per car a day.

Based on the latest floating market prices in Singapore, the Asian oil trading hub, Malaysian prices would have to rise 69 percent to 86 U.S. cents a litre of petrol and 157 percent to $1.08 for diesel.

Reuters

Güncelleme Tarihi: 04 Haziran 2008, 13:44
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