Analysts: Subsidy removal a good move

PETALING JAYA - The fuel subsidy removal, shows that the Government is fiscally responsible, say analysts and economists.

Alliance Research chief economist Manokaran Mottain said without subsidies, Putrajaya could save more than RM20bil (S$7.7bil) in operating expenditure for the next 12 months, provided the current price of oil remained over the next 12 months.

"It is a timely move as the lower oil prices are affecting the nation's revenue," he said.

About 30 per cent of the nation's income comes from oil and the current market price of less than US$80 (S$104) a barrel has resulted in a drop in revenue.

"Removing subsidies will compensate for the decrease in revenue."

RHB Bank research head Alexander Chia said the savings could be used for more practical purposes.

"Our fuel subsidy bill in 2013 was over RM20bil. If we eliminate that and prices are floated with no subsidy, we stand to save a lot."

He said the price of goods and services would depend on the announced pump prices.

Petroleum Dealers Association of Malaysia deputy president Datuk Zulkifli Abdul Mokti said there would be no difference if the float system was well managed.

"We will only feel the effects after it is announced.

"Cost of goods and services would be decided by the price of fuel at the pumps," he said.