Diesel Subsidies

In principal, I am against subsidies. Whether it is for petrol, diesels, gas, utilities, food and many others. It will create inefficiency in the market. Though there are a few exceptions such as in the area of education and health where I believe that the government have to fully support due to the inherent responsibilities of governments to maintain the public well being.

It is a fact that prices of materials and commodities have increased dramatically in the global market. A higher income population in Asia and Latin America are eating and consuming the resources of the world. This have inadvertently push the prices of most goods to record high.

Locally throughout the decades, the government have tackled this issue in a populist manner by giving subsidies in most critical areas. From fertilizers to petrols, the government have spent billions in subsidies to maintain fixed prices. Unfortunately, the global prices of materials and commodities are still moving upwards with no sign of stabilizing in the near future. It has thus come to a point where the government could not afford to support subsidies for the people.

Recently, the government have made known their intention to pull back or reduce subsidies for diesel. The government chose diesel as their first commodities due to their logic that diesel have a smaller user based compared to petrol. Though, I have to point out that this small user base consist of trucks, lorries, buses and heavy machines that more or less serves as the backbone of our logistic industry. Meaning any price increase on diesel will directly increase the cost of deliveries of goods. This will most assuredly increase the prices of consumer goods. And thus, reducing discretionary income of the public.

The problem with this country is that our income do not increase in proportion to that of the price increase. Which means as we move forward, we will be getting less discretionary income.

Unfortunately, I do not foresee any short term solutions that will be good enough to solve the diesel subsidy issue or any subsidies issues without creating a shock to the consumer. It is my view that the government have to come up with a clear and holistic plan and policy in reducing subsidies in the long term and not tackle the issue piecemeal by piecemeal.