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IN PUTRAJAYA - AFTER days of confusion, the ban on petrol sales to foreigners within 50km of Malaysia's borders was lifted.
Singaporeans and Thais can top up their tanks at kiosks near the borders, albeit at higher prices.
The Malaysian government said this yesterday as it raised fuel prices for all consumers by 40.6 per cent from today in a radical move to slash its rocketing fuel subsidies, marking an end to cheap petrol in the country.
The price of a litre of petrol is now RM2.70 (S$1.13), compared with RM1.92 before, bringing it closer to the global market price.
The price of diesel went up 63 per cent, from RM1.58 to RM2.58 per litre.
'We cannot naturally keep subsidising at the current rate,' Prime Minister Abdullah Badawi told a news conference.
The new scheme, part of a long-term plan to phase out all subsidies, is likely to spark outrage among a population used to heavy subsidies and dependent on their vehicles due to an inadequate public transport system.
Following last night's announcement, there were massive jams along major roads in the capital as drivers made a last-minute dash to refuel.
But the announcement provided relief for some drivers as the petrol sale ban on foreign vehicles was lifted immediately. The ban had been imposed on Monday in border towns near Thailand, while a similar ban was supposed to start next Monday in Johor.
'With the rise...it means that when foreign vehicles come in...they no longer enjoy the subsidy,' said Domestic Trade Minister Shahrir Samad.
He said that the pump price could rise to more than RM3 when price controls are removed completely in August. But he did not give details.
In a double whammy, Datuk Seri Abdullah also said that electricity tariffs will rise up to 26 per cent, depending on usage. Electricity and fuel prices have not risen in two years.
To cushion the blow, the government will hand out an annual cash rebate of RM625 to owners of cars with an engine capacity of 2,000cc or less. Motorcyclists will receive RM150.
Petrol and diesel prices will now be adjusted monthly, but will always be 30 sen cheaper than the market price, added Mr Abdullah.
The move will save the government RM13.7 billion this year and will likely push the inflation rate to between 4 per cent and 5 per cent , up from 3 per cent currently.
It comes at a precarious time after the ruling Barisan Nasional suffered its worst election results in 40 years recently. But Mr Abdullah brushed aside concerns and said he did not expect protests. 'This is not an attempt to be popular. We cannot satisfy everybody.'
One of them is engineer Azahar Abdul Wahab, 34.
'The government needs to build a better public transportation system, at least equivalent to Singapore's MRT, before it raises fuel prices so drastically,' he said.
Mr Azrul Azwar, senior economist at Bank Islam, told The Straits Times the move will result in reduced consumer spending, particularly for non-essential items such as vacations. He also warned that the move would anger ordinary Malaysians and trigger protests.
However some lauded the move. Mr Irvin Seah, an economist at DBS Group Holdings, told Bloomberg: 'It is better that they bite the bullet right now than to postpone it any further. The pain is immediate, although the benefits will come in the longer term.'
hazlinh@sph.com.sg
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