Malaysia removed diesel subsidies on June 10, 2024, to address the escalating diesel subsidy bill. The bill had risen from RM1.4 billion to RM14.3 billion (US$3 billion) in just 3 years from 2019 to 2023. This move also aimed to curb leakages due to diesel smuggling. As a result, diesel prices in Peninsular Malaysia increased by 56%, from RM2.15 to RM3.35 per liter. Despite the increase, it remains the third cheapest in Southeast Asia after Brunei and East Malaysia, where subsidies remain due to higher travel distances and costs.
Previous governments faced political backlash when cutting fuel subsidies, such as in 2006 when price hikes led to protests and contributed to the Barisan Nasional party losing its two-thirds majority in the 2008 election. The current government, led by Anwar Ibrahim, aims to phase out fuel subsidies gradually, starting with diesel, with hopes that public discontent will ease before the next general election in early 2028.
Despite saving RM4.5 million per day, the government continues to provide about RM6.5 billion (US$1.48 billion) in subsidies for 33 categories of commercial vehicles to prevent significant price hikes.
Table of Eligible Vehicle Categories for Subsidised Diesel Control System 2.0 (SKDS 2.0)
(Source: KDPN, Malaysia)
Immediate Impact on Daily Life
On the ground, the policy change has caused immediate price increases. For example, roadside food stalls in Johor raised drink prices, and seafood markets in Gelang Patah struggled with higher ice costs. Small businesses using pick-up trucks face increased fuel costs, impacting their already tight budgets. RoRo (short for Roll-on, Roll-off) truck drivers and NGOs also suffer from higher diesel costs, and small-scale fishermen worry about the impending petrol price hikes.
While Malaysians understand the necessity of subsidy rationalization, the average citizen bears the brunt of these measures. An IPSOS survey showed that 7 in 10 Malaysians feel the country is in a recession. Despite positive macroeconomic indicators, many Malaysians do not see improvements in their daily lives, highlighting the need for better support for those struggling economically.
BUDI MADANI: Relief in the Form of Cash Aid
In a move to ensure the subsidies are directed only to those who truly need them, the Malaysian government concurrently introduced the BUDI MADANI Assistance Programme, a cash aid initiative designed to provide financial relief to individuals and small commodity owners affected by the removal of diesel subsidies.
Under this program, eligible recipients receive a monthly cash aid of RM200 to help offset the increased cost of diesel fuel. Approximately 100,000 recipients, including individuals and small commodity owners, have been approved to receive this aid as of June 19, 2024.
The program has two categories:
- BUDI Individu for private diesel vehicle owners, and
- BUDI Agri-Komoditi for farmers, livestock breeders, or small-scale commodity growers
Applications have opened for all who are eligible since May 28, 2024.
Who is Eligible For BUDI MADANI?
| Eligibility for BUDI Individu | Eligibility for BUDI Agri-Komoditi |
| • Malaysian citizen • Annual individual or joint income of RM100,000 or below • Own diesel-based personal vehicles as registered with JPJ using IC, that are not considered luxury and under 10 years of age • Vehicles must have active road tax NOTE: Each application will be cross-checked against LHDN’s database to exclude owners of luxury vehicles under 10 years old and high-income individuals (T20). | • Must be registered as a farmer or smallholder with the Ministry of Agriculture & Food Security (KPKM) or the Ministry of Plantation & Commodities (KPK) • Must be an active smallholder with annual turnover between RM50,000 and RM300,000. |
Applications are accepted year-round through the BUDI MADANI website. Early applicants who apply by June 3, 2024, will receive their first cash assistance by mid-June 2024. Subsequent applicants will receive assistance within two weeks of approval. Funds will be credited to bank accounts monthly, with Bank Simpanan Nasional facilitating collections for those without bank accounts.
For more information, you can:
- Visit the official BUDI MADANI website
- Contact their helpline at 1-800-88-2747 / 03-8882 4565 / 03-8882 4566
- Email budimadani@treasury.gov.my
- Visit any LHDN offices throughout Peninsular Malaysia
The BUDI MADANI program complements the existing MySubsidi Diesel Fleet Card Programme, which supports logistics companies with subsidized diesel to help reduce costs and prevent price increases. This initiative aligns with the Ekonomi MADANI framework, aiming for financial sustainability and competitiveness in Malaysia.