Petrol price – subsidy, levy or free float?

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Blog reader Sam Gopal has this to say:

Anil,
You have been advocating strongly for a STRONG and WORLD CLASS public transport system. At this very time you are asking the Government to lower petrol prices. Lowering petrol prices will only make the public go back to using their cars even more. I think the push is for the Government to maintain a levy of petrol and then use this MONEY effectively to IMPROVE PUBLIC TRANSPORTATION system. Lets not jump into the bandwagon and simply oppose for the sake of opposing.

On the other hand LGE is making ludicrous demands of giving RM6,000 per family using PETRONAS money. Seriously, why can’t he talk about using this money to improve public infrastructure? The very thing China is doing, pumping in USD600 BILLION plus to improve infrastructure, and not handing out money to its citizens just like that, where ther is NO Return On Investment, except paying for more imports with this sort of money handed out.

To clarify, I am not advocating a total peg to the market price. So while a price of around RM1.50/litre might be the real market price price based on the current global market price for crude and the historical trend (as Penang CM Lim Guan Eng has suggested), it might not be prudent to use that price. A price reduction, yes (to provide immediate relief for people affected by the slowing economy), but not a total free float.

I believe in the long run, we need to tax fossil fuels, which are a polluting, non-renewable resource. This could take the form of a small levy to invest in renewable energy (solar, for instance), public transport and other conservation projects. Such a levy should accompany immediate significant improvements in public transport – but so far, all the past promises of improved public transport have not materialised. This levy must go into a special “green fund”, which must be carefully and transparently managed.

Only problem is I don’t think it’s possible to have such a transparently managed fund under this administration; if the fund is not managed properly, the money could so easily be squandered in dishing out inflated contracts to cronies, as we all know. It is risky to talk about pumping in billions into infrastructure when we know there are many “leakages” along the way. Public spending should be for the widest possible public benefit and not just to profit some big-time crony contractors.

At the same time, we cannot look at the petrol price in isolation as if it has no impact on the poor. Of course, the traditional argument is, why should we have petrol subsidies to subsidise those with fancy cars while many of the poor hardly use cars? We need to look closely at how the petrol price affects the price of food and realise that higher food prices will hurt the poor. We all saw what happened to the price of food when the petrol price was hiked 41 per cent. A small levy on petrol prices must also go hand-in-hand with improvements in food security.

Food security in this sense means taking steps to promote sustainable agriculture – not the agrichemical-driven model which has a close correlation with the price of oil. It would involve returning land or leasing state land to small farmers to increase self-sufficiency in food, possibly for each state. It shouldn’t be too difficult to allocate land for vegetable farms and orchards in each state, at the very least. If we can find land for golf courses, we can jolly well find land for sustainable agriculture. Also, bear in mind that many developed nations provide subsidies for their farmers.

Another part of the problem is that the large processed food and beverage companies (including the multinationals) rarely reduce their retail prices even when the prices of their ingredients and raw materials drop. Stock market investors regard these large companies as “recession proof” and they end up making huge profits. So why do we only focus on  hawkers and nasi kandar vendors? What about the big food processing manufacturing firms? Do you see them reducing their retail prices? Consumers should seriously consider whether they want to persist in buying such products if the prices are not lowered accordingly.

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aaa

its not just opposing for the sake of it. i have posted many times months back before the slump in oil prices, that whichever way the market goes, we are in trouble. sure, it is now coming true. lower crude means lower revenue and this indirect tax is to plug the big hole. forget about better transportation. it aint gonna be able to catch up with the minimum requirement coz this govt will never have enough money just to feed the ever-hungry UMNO fellas. this is just another tax imposed on the citizens on top of the high excise duty… Read more »

Sam Gopal

Thanks Siew Eng! Great to have people like you, KK, and Killer around contributing positively to Anil’s blog. Yes, I we have never met, but I know Anil pretty well… A great guy, who is ever willing to discuss sensibly even though we may have different opinions. And all I am trying to say, is that being optimistic and taking opportunities to improve and Value-Add to society can solve problems, rather than assuming everyone out there is a crook. There are no problems, Just Opportunities! Another point I wish to add is that, at this time, we need an expansionary… Read more »

KK

While I agree to use the profit from fuel tax to improve public transportation system, I have to disagree on letting the federal goverment manage the funds. There is so much bureaucracy in the existing system that even a simple thing like enforcing metered taxis cannot be done effectively. What I propose is to 1. decentralize public transport authorities. Channel the fuel tax to their individual states. There is more return of public transport investment for states with higher fuel tax collection. 2. give the states full authority to plan and execute their own public transport masterplan. 3. introduce state… Read more »

Siew Eng

Can we stop with the personal attacks? Esp Amira, who seems to be advocating apathy in censuring someone who is merely trying to find a solution. And Chong, while he had counterpoints, had to insert unwarranted remarks demeaning Sam. We can do without those who only know how to spread negativism and cynicism but not offer constructive criticism, and worse, stop others from trying to make things better. I think Sam’s suggestions make sense. Just because an idea has not been put to practice in the past because of bad implementers does not negate its merit. Nor should we give… Read more »

Ganesh

Sam, you use bombastic words and seek a lot of praises. But you do not know anything and you sound like a joke blowing your own trumpet. You seek recognition on your achievements? With regards to your statement, “Despite all the shortcomings, the Government must have done something good, otherwise we would not have achieved so much”, kindly be informed that Malaysia has achieved so much because it is a rich country with abundant of natural resources to start of with. It was bound to achieve whatever it has achieved. “Ask Not what the Country Can do for you, but… Read more »

mut

The lesson to be learnt from the recent spike in fuel prices is that we must find ways to make sure oil prices does not wreak havoc on our lives again. This was a timely warning. If people do have a choice of having a car, or simply using an efficient public transport system, I think many would opt for the latter. Put in bad public transport, expensive cars, fuel and road tax, you will have a scenario that fits Malaysia. Many of this problems came from ill-thought out policies and corruption. A national car project that can’t sell abroad?… Read more »

Killer

Anil You might have a point in saying that setting up a “green fund” possibly cause leakages. But if we keep finding excuses for every of our actions due to potential problems, we will never get to do anything. The whole point of putting more Opposition MPs in the Parliament is to make sure the Administration has the necessary checks and balance. However, unfortunately Pakatan Rakyat MPs seems to focus more on underminding BN than doing their job as a responsible Opposition. Just look at LKS, Karpal and DSAI, instead of picking their fights carefully, they just go head-on on… Read more »

Killer

Sam It is hard to find people who speak with reason and logic here and in many sites. The liberty to speak freely has made Malaysians speak more but with nothing worthwhile of saying. Though I am advocate of public transportation, I kind of puzzled by Anil’s inconsistent stance in this issue. We should allow the drop in pump prices to distract us from building excellent public transportation system. It is often said that people who forget history are often condemned to repeat it. I wouldn’t be surprised some day petrol hits US $ 200 and we Malaysians will be… Read more »

Sam Gopal

Anyway to all your comments, especially Amira. There is no difference between you and yhr Home Minister. You ask me to shut up because you disagree, Hamid Albar just puts them under ISA if he disagrees. So?, I live and am really thriving here. I have brought in foreign companies to invest in Malaysia in the last 5 years. In total it would be at least RM80-100 million annual exports for these co. In the next year I am bringing in another RM20-RM30 million in product transfers for 2009. I did not do this by running down my Government or… Read more »

chong

and did he watch the debate bewteen anwar and strawberry???/the saliva foaming minister? when he was asked on where has the saving of the petrol (RM40 billions) gone into, he couldn’t muster any answer but attacked on anwar personally on his previous deeds.

Oh my goodness, how many malaysians are like this joker???

no wonder, BN/UMNO can rob us and sodomise us upside down for 51 years…

oh God, pls get rid of this type of joker from malaysia.

chong

hahahaa… i’m laughing till rolling on the floor. is this dude, Sam Gopal living in malaysia??? remember in 2004, when bodowi increased the petrol to RM1.92/liter and had saved over RM40 billions (if not mistaken), they said they gonna channel the money to public transpotation. what has happened then??? has our public transportation been improved??? when i remember is they bought on 400 buses and left them turn into rust. hahaha this fellow is really a joker. sure know how to make us laugh… dielah if most malaysians are only as smart as him… hahahhaa, joker, can you pls find… Read more »

qunimade

In 2007, 4.6Billion has been saved and Najib claimed that he will use this money to improve the public transport. But it is only a lie, a “janji kosong”. (perhaps, he has used this money to buy submarines,including the commissions,and to finance his pet LPKN projects where innocent teen dies, and where the teens are being brain washed by those BTN-like flurs). Now the Guomen has been taxing huge profits from the petrol pumps without shame (the petrol price should be RM1.40 by now), so will this amount of profit be used to improve the public transport? Well, may be… Read more »

toolan

Dear Mr.Sam : You have a very good point and by all means, under normal circumstances, that is what the government should be doing. Unfortunately, you and I are living in a country whose government thrives on milking funds meant for the “rakyat”. You are not the first to recommend this, and this is not the first time such request and effort have been put in action or “in the pipe line”(so to speak), but look at where we are regarding our public transports. Therefore, it is no longer an issue whether the government will put the allocated money for… Read more »

caravanserai

Pump petrol price It isn’t what it would be It should be around $1.50 per liter Currently it stands at $1.90 per liter In a way the BN government Supporting the oil companies Instead of doing the right thing It marginally reduces it And the prices of goods Walk into any hawker’s stall You shall not find price reduces And the multi-nationals closing one eye It is going up nothing coming down We hear the minister says prices of goods Doing some publicity…………. I assume there is a levy If that it so, the government better uses it Get the… Read more »

Jimi

Hi Anil, I heard that Datuk Zaid is starting a foundation called MyFuture. I would like to get involved. How do I contact the foundation? I can’t find any info about it. Have you heard anything? Can you please advise. Thanks, Jimi

Ganesh

Sam Gopal, how sure are you that if the levy is maintained, the money will be poured into the public transport system instead of being poured into one or two pockets? People want immediate savings, not in the long run, where the money can disappear. Billions have disappeared, what is stopping more billions from disappearing? Don’t crack your head too much and analyse things. Go down to basics. Avoiding sin is one thing, avoiding occassions of sin is another. Let there me no opportunity for money to be squandered. Like I said people want to see immediate savings, thus, why… Read more »

amira

Dei Gopal, don’t talk nonsense la…you say “use the money effectively to improve public transportation.” Just ask yourself since when did they use the savings from petrol to improve transportation. Last year the Gov save billions from the subsidies and said very clearly they will pump in the savings to improve the public transportation. Porek..mana ada….You sounds like you just woke up from your sleepla….Better shutup and go back to sleep.