Thursday, 3 December 2009

Sweet Subsidy: Is That Why Its Got to Go?

It does seem like “subsidy” is a much maligned word these days.

Much maligned as though it’s THE grotesque wart that is hindering this nation’s perfect statuesque appearance.

Whatever it is, we do not have to look too far ahead to see what life is like without all these “tongkat”s pushing commodity prices downwards.

For one, the government is looking set to use a MyKad-based method to facilitate a subsidy-less floating of the pump price.

Two things come to mind:

One, my own MyKad is splitting into two, so using THAT would be an exercise in temper controlling.

Two, since I a considered middle income earner, I would have to pay the non-subsidies rate anyway.

Fine. No problem.

Right now, I have to pay premium price at the pumps as my K-Car is such a sluggard when filled with RON95 petrol anyway.

It’s harder to empathize with the removal of subsidies from the other commodities, though. Sugar, cooking oil, flour and rice, to take some examples.

The direct impact for consumer like you and me will not be that major, perhaps, as most families (speaking of the so-called middling group of the neither poor nor rich) are already paying market price (?), with the exception of sugar.

It is the indirect impact that would hurt our wallets, though.

Producers will take the cue to raise prices when subsidies are lifted, never mind the portions of the subsidized commodities.

The ever-popular Malaysian benchmark of inflation – the teh tarik and roti canai – will shoot up, followed with a round of indignations by all and sundry.

Then, a compromise whereby Mamak stalls and restaurants everywhere (Ahem!) sacrifice their earning to “subsidize” this so-called Malaysia staple.

Silently, though, the prices in the other items will creep up.

Nowadays our RM10 note is just enough for a single person unless they go really, really stingy.

This creeping up in other prices is the real net effect of any moves to de-subsidize commodities.

Couple the removal with the introduction of the GST (Good and Services Tax) and it could well mean that our Ringgit shrinks even further.

The government is quoting figures such RM1b and RM2b in extra revenues from GST and petrol subsidy withdrawals.

Not much moollah when it comes to boosting the national coffer, actually.

In fact, it’s not even enough to cover the recent Government's PKFZ bond guarantee .

We really should be looking elsewhere for more solid savings.

Plugging government expenditure leaks, for example.

Wonder how much we can save from there.

Subsidy me this?

LP640. Sweet..

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