Fueling Fairness Malaysia S Bold Step To Save Billions Without Hurting The Rakyat

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IN 2023, Malaysia’s fuel subsidies reached an unsustainable RM38 bil, with RON95 petrol alone costing the treasury RM20 bil. While such subsidies are popular, they are also unsustainable and often benefit those who least need them.

A case in point, according to the Finance Ministry (MOF), 15% of consumers, primarily wealthy individuals, foreign nationals, and businesses, received 40% of the RON95 subsidy, worth RM8 bil.
In response, the government has introduced a targeted fuel subsidy mechanism under the BUDI95 program, which officially launched on Sept 30.
Under the new system, Malaysians with valid driving licenses became eligible to purchase up to 300 liters of RON95 petrol per month at RM1.99 per liter, amounting to a subsidy of approximately RM183 each month.
This shift marks a significant policy move towards a more sustainable and equitable model of public assistance. By targeting three core issues: (1) subsidy misuse, (2) fiscal burden and (3) enforcement loopholes, BUDI95 could reshape how Malaysia manages fuel affordability.
Cutting waste and foreign fuel drain
The first area of concern is subsidy misuse. Fuel subsidies were originally intended to ease the cost of living for all.
However, in practice, much of the benefit has flowed to upper-income groups. Wealthier individuals tend to own high-capacity vehicles that consume more fuel.
For instance, a 2.5-litre SUV may burn between 15 and 18 liters per 100 kilometers, compared with just 5 to 7 liters for a compact vehicle like the Perodua Myvi. This results in the wealthy receiving more subsidies simply because they use more fuel.
(Image: Bernama)Cross-border fuel tourism adds further pressure. Prime Minister Datuk Seri Anwar Ibrahim revealed that some 3.8 million foreigners, including cross-border tour agencies, have been enjoying Malaysia’s subsidised fuel for decades.

He called it a clear example of policy leakage that must be addressed, particularly when public funds are involved.
The new model tackles these issues directly by linking subsidies to a verified Malaysian identity and a valid driving license, while also capping subsidised usage. This limits access to non-citizens and ensures that only legitimate users benefit.
Beyond its core goals, the policy has also delivered an unexpected benefit, which economists call a positive externality: a side effect that helps others, even if it was not the main goal.
Following the BUDI95 announcement, according to data from the Road Transport Department (JPJ), driving license renewals rose by 53%, indicating that many Malaysians are now taking steps to ensure their eligibility for the subsidy.
This behavioral shift promotes safer, more regulated driving practices and reduces the number of unlicensed drivers on the road. It is a classic case of “sambil menyelam, sambil minum air”—while pursuing one goal, another is achieved at the same time.
Reclaiming public funds for the people
The second area is the growing fiscal burden. According to the MOF, the BUDI95 mechanism could save the government between RM2.5 bil and RM4 bil a year.
These savings are not merely numbers on a balance sheet. They represent real resources that can be redirected to more impactful areas like healthcare, education, and targeted social assistance.
This careful balancing act is supported by data shared by the Minister of Finance II, Datuk Seri Amir Hamzah Azizan.
Citing the Department of Statistics Malaysia (DOSM), he noted that at 140 liters of monthly fuel usage, 90% of Malaysians still qualify for subsidies. At 180 liters, this figure rises to 95%, and at the 300-liter cap, 99% remain covered.

To further strengthen public trust and awareness, the system now offers full transparency at the pump. Malaysians can see exactly how much subsidy they are receiving each time they refuel.
For instance, when a driver filled up 25 liters at RM2.60 per liter, the total cost would have been RM65. However, after applying the government’s RM0.61 per liter subsidy, the driver only paid RM49.75, with the receipt clearly showing a government contribution of RM15.25.
By making the subsidy visible, the system encourages more responsible consumption. It also increases public appreciation for the cost of universal aid, fostering a broader cultural shift toward fuel efficiency and accountability.
Sealing loopholes and encouraging safer roads
(Image: Bernama)The third area addresses enforcement loopholes. Past systems lacked the safeguards needed to prevent manipulation, resale, and misuse of subsidised fuel.
Unrestricted diesel subsidies have in the past been exploited by middlemen who resell fuel on the black market or smuggle it across borders. Even income-targeted fuel subsidies risk creating a secondary market where those who receive the subsidy illegally sell it to others.
Identity verification through MyKad and driving license requirements makes it harder for individuals to manipulate the process or claim benefits they are not entitled to.
Combined with identity verification and consumption limits, this outcome contributes to a more secure and accountable framework, one that ensures subsidies reach their intended recipients and are not diverted through syndicates or informal resale networks.
A smarter path forward for Malaysia

At its core, BUDI95 is built on sound logic. It prioritises fairness without sacrificing fiscal responsibility. It protects most Malaysians while removing longstanding inefficiencies that have burdened the nation’s budget for years.
Notwithstanding, the success of this policy will depend on a nimble and responsive implementation phase. The government should anticipate and treat initial challenges as teething problems, not failures.
By closely monitoring public feedback and emerging data, the system can be continuously refined and adapted. This agile approach will be crucial for troubleshooting issues in real-time, ensuring the rollout stabilises quickly and gains public confidence.
If implemented effectively, it could serve as a blueprint for future reforms not only in fuel policy but across other subsidy systems. It shows that Malaysia can adapt its policies to meet current challenges without compromising on equity or public trust.
Dr Mohd Zaidi Md Zabri is the Interim Director at the Centre of Excellence for Research and Innovation in Islamic Economics (i-RISE), ISRA Institute, INCEIF University.
The views expressed are solely of the author and do not necessarily reflect those o MMKtT. 
- Focus Malaysia.

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