Shahrir: Government now enjoying fuel tax revenue

What a turn of events! In just a few months we’ve gone through a record number of petrol price hikes and reductions, the hasty introduction of a lump sum-based subsidy cheque, and more. All because of fluctuating crude oil prices.

As of today, Malaysians have begun paying tax for their fuel again… in fact the government has not had to pay the promised RM0.30 per liter fuel subsidy since the beginning of November 2008 due to the dropping crude oil prices which leads to lower refinery prices.

According to Minister of Domestic Trade and Consumer Affairs Datuk Shahrir Samad, the government also collected taxes for fuel from September 2001 to February 2002, but after that period crude oil had gone up so the government had stopped collecting taxes to prevent fuel prices from going up too much.

From the current price of RM2 per liter from RON97 petrol, roughly 12 sen goes to the petrol stations and roughly 19 sen goes to the oil companies. The balance is RM1.69, but Shahrir says this is actually higher than the refinery price.

While he did not say exactly how much refinery prices were at the moment (this will go up and down according to crude oil prices), he gave an example of RM1.30 per liter. This means the government can make as much as 39 sen per liter of fuel, and this amount will vary as the refinery prices go up and down along the month.

Because of the change of situation and the potential now for long-term income from the sale of fuel in this country, the government Economic Council will be meeting this month to decide on a new mechanism for petrol pricing in the country. Things that could be discussed are how often should price revisions be made, and what kind of tolerances towards crude oil prices should there be. I would imagine they could decide on something like a maximum tax when crude oil prices are low (or alternatively, a floor price for petrol), and a maximum subsidy when crude oil prices are high.

It’s sad to see the government so easily turn its back on its promise of a RM0.30 per liter subsidy, but Datuk Shahrir is of the opinion that the current low fuel prices are quite fair and there’s no need to go drop them too much even though the government won’t have to pay fuel subsidies per liter. He says this additional revenue will be used to strengthen the economy in face of the threat of the recession.

I’m pretty sure the Cabinet is happy with Shahrir’s performance as Minister of Domestic Trade and Consumer Affairs so far. He’s done his job well in helping tighten the government’s coffers, though many would argue it isn’t in the interest of “Consumer Affairs” at all.

All we can do is hope that the money saved and earned will be used in the right channels by those who have the nice job of choosing where to spend the money.

BTW, no one has revealed what the margins, subsidies and revenues are for diesel. Is there room to upgrade to something with a less sulphur so we can enjoy cars like the Ford Focus TDCi and a potential upcoming diesel Honda City?