Subsidies Reduction

With crude oil prices passing the USD130.00 mark, the Malaysian government have no choice but to reduce subsidies by increasing prices of essentials and commodities. Though an unpopular move by the government, it is only by reducing subsidies can wastages be stop. It's basic economics.

Recently the prices of iron have been uncapped by the government, thus ensuring more or less an open market pricing mechanism that would immediately increase the price of iron. Most contractors and developers welcome such moves since it will reduce the dependency on iron black market. Though there will be an increase of prices in future development, I would say it'll properly adjust itself in the future by lessing demands. Hopefully there will be an increase in efficiency in the metal industries, by players merging their resources or sharing their facilities to lower production costs. And developers can be more ingenuous by exploring development techniques that'll reduce cost and shorten construction works. Of concern, is the middle and low cost houses. Unfortunately, for the immediate future, cross subsidies by developers or even direct subsidies by government have to be taken to ensure a reasonably priced homes be offered to the poor. A transparent and equitable purchasing system have to be setup so that only the truly deserving can purchase the homes.

While at the same time, rice prices have been set at certain ceiling depending on the quality of rice on retail. While special rices such as basmati, herbaponi have been uncapped. Though unfortunate that the government have to provide rice subsidies, it is important that the people nutritional needs are taken care of. Anything lesser than, the country might face a civil unrest.

And now,most probably in August the government is going to present a new oil subsidy scheme to tackle the rising price of global oil. I would provide a wild guess that the adjusted price at pump would be around RM2.50-RM3.00 per litre. While subsidies fuel would either be maintained at current price or increased slightly to RM1.95-RM2.00 per litre. This would probably be applied for the lesser grade fuel (RON 93/95). There would probably be no more subsidies for the higher grade fuel (RON 97/99), thus making the price roughly around RM4.00 per litre. Though this is just baseless assumption, mind you.

Of course, cost of living will increase and thus inflation will increase. People will feel more burden on their shoulder while their ringgit are stretch to its very limit. Hopefully, all this savings from the reduction of fuel subsidies will go to lower other cost such as lowering car and income taxes at the federal level. While the state might be able to reduce land and assessment taxes. This will go along way in reducing the burden of the people.