Diesel subsidy for East Malaysia could double to RM4.6bil, says Armizan

The domestic trade and cost of living minister says the projection was calculated based on consumption levels in 2025 and current market prices.

Domestic trade and cost of living minister Armizan Mohd Ali said the fiscal impact of the bulk diesel subsidy in Sabah and Sarawak is already substantial, with the government having spent RM2 billion on the subsidy in 2025.

“Based on the same consumption levels and current market prices, the government’s subsidy burden is projected to increase to RM4.6 billion in 2026,” he said in a statement.

Armizan said taking into account the uncertainty surrounding the West Asia conflict and global oil prices, one of the immediate intervention measures decided by the Cabinet is to strengthen enforcement coordination across all relevant agencies.

“The government’s subsidy burden will continue to rise sharply if domestic fuel misappropriation and cross-border smuggling are not curbed,” he said.

Committee to combat leakage and smuggling activated

Armizan said the Cabinet had on March 11 directed the immediate activation of the High-Level Inter-Agency Coordination Committee to Combat Leakage and Smuggling.

The committee will be chaired by deputy prime minister Fadillah Yusof, while the domestic trade and cost of living ministry will serve as the secretariat.

He said the risk of fuel leakage and smuggling in Malaysia has increased because retail prices of diesel and petrol at the pump remain significantly lower than market prices, despite price adjustments made for the period from March 12 to 18.

“The adjustments were necessary following a sharp increase in global Brent crude prices, which rose to between US$90 and more than US$100 per barrel in the previous week, compared with between US$60 and US$70 per barrel before the conflict began,” he said.

Armizan said the risk of leakage and smuggling is particularly high in Sabah and Sarawak as the bulk diesel subsidy remains in place in both states.

In Sabah and Sarawak, diesel is sold at the pump at RM2.15 per litre, compared with RM3.92 per litre in Peninsular Malaysia, while the current automatic pricing mechanism market price has reached RM4.30 per litre.

This means that consumers in Sabah and Sarawak are purchasing diesel at less than half of its actual market cost.

He said enforcement operations will be carried out under the Control of Supplies Act 1961 and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.