KUALA LUMPUR, May 16 — The government will remove diesel subsidies for hauliers effective June 1 as part of the Najib administration’s ongoing subsidy rationalisation programme, which experts have said will lead to higher prices for consumers.
Sources told The Malaysian Insider that hauliers received a letter from the Domestic Trade, Cooperatives and Consumerism Ministry last week informing them of the decision to do away with the subsidy, which varies every month depending on the market price of diesel.
Association of Malaysian Hauliers (AMH) president Datuk Ahmad Shalimin Ahmad Shaffie confirmed he received the letter and said the association was now calculating the impact the subsidy cut will have on the business.
But he said, regardless of the final “real numbers”, the association would only bear part of the increase as fuel costs already account for about 30 per cent of operating costs at present.
“Definitely, at the end of the day, we’ll have to absorb some (cost) and pass some on to users,” Ahmad Shalimin told The Malaysian Insider.
AMH, whose members control 70 per cent of the local container haulage market, announced last month that it would raise transportation tariffs by 20 per cent on June 1 due to escalating maintenance and operation costs.
Ahmad Shalimin had blamed the drop in productivity and efficiency on delays at container depots caused by an increase in haulage operators and a decrease in efficiency following the liberalisation of the industry in 2000.
A Transport Ministry spokesman told The Malaysian Insider yesterday there were some 33,320 semi-trailer cargo trucks, 42,800 semi-trailer container trucks and 2,850 trailer cargo trucks registered with the Road Transport Department (JPJ).
The Malaysian Insider understands that it costs RM5,000 to RM6,000 every month to fuel a truck with a 400-litre tank. Each truck consumes one litre of diesel for every two kilometres travelled.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the removal of subsidies would “definitely” translate into pricier goods as the higher fuel cost would eventually be passed on to the consumer.
“Once input cost increases, the pass-through is just a matter of time,” he said. “It just depends on the nature of the competition and the pricing power of the distributors or manufacturers.”
Yeah said that fast-moving items with few substitutes and higher demand will see the fastest price increase while those that are easily substituted will experience less immediate effects.
“In cases of items where there isn’t a choice and there is strong demand, you can expect the price to increase quite fast,” he said, adding that for some goods the price increase will be “almost concurrent”.
He added that the amount and speed of the pass-through will be determined by the level of competition in the industry as well as the ability of players to absorb price increases.
A Kenanga Investment Bank Bhd analyst said the impact on consumers would likely be mitigated by the staggered tariff hikes and be delayed by “one to two months” due to lag.
“The bottom line impact will certainly be an increase in charges but it won’t be a substantial increase,” he said. “It will be a minimal or phased increased. It won’t be a sudden increase.”
Both the haulier diesel subsidy cut and tariff hike will coincide with the removal of diesel subsidies for Zone C2 fishing vessels reported last Thursday.
The Agriculture and Agro-Based Industry Ministry had announced that the RM1.25 per litre diesel subsidy for Zone C2 deep-sea fishing vessels would be removed from June 1.
The subsidy cut, which will affect some 1,200 vessels that operate 30 or more nautical miles from shore, is expected to save the government RM226.8 million annually.