Friday 29 Mar 2024
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KUALA LUMPUR: The scrapping of the fuel subsidy to base the prices of RON95 petrol and diesel on a managed float system from next month means that the rakyat will have to bear the extra burden of guaranteeing the profits of oil companies and petrol dealers, a PKR lawmaker said.

Party secretary-general Rafizi Ramli said under Malaysia’s version of the managed float system, about 30 sen is added into the cost per litre of petrol and diesel for profits guaranteed to oil and gas companies and petrol dealers.

This covers their costs of transport, distribution, marketing and operations and also protects them from global price fluctuations. He said other countries have an open market system, in which the costs are pegged to the Means of Platts Singapore or MOPS.

Rafizi said MOPS is the price of petrol and diesel which is refined and traded through Singapore, adding that this is usually the base price taken while the rest is left to the market to determine. “Therefore in an open market, oil companies use MOPS only, so it is up to them to undercut their competition and sell cheaper.”

In Malaysia, the cost of petrol and diesel is based on MOPS with the addition of costs that amount to 30 sen per litre. As such, Rafizi questioned Umno youth chief Khairy Jamaluddin’s defence of the managed float system, asking if he is now advocating the protection of big corporations at the expense of the rakyat.

 Rafizi said that if Putrajaya is going to expose the people to fluctuations of crude oil prices on the world market, it should also remove protection for the oil companies.  He said the managed float system is the same as the automatic pricing mechanism (APM) practised here since the 1980s, with the only difference now being the removal of subsidies for the rakyat.

He said that under the APM, while the margins of oil companies and petrol dealers were guaranteed, subsidies for the public were in place, which made it a fair system. As such, he urged Khairy to clarify his defence of the managed float system.

“When he goes around town and defends the managed float system, does he mean he prefers to protect the interests of corporations and not the rakyat?” he said. — The Malaysian Insider

 

This article first appeared in The Edge Financial Daily, on November 25, 2014.

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