The Malaysian government is considering implementing targeted diesel subsidies in Sabah, Sarawak, and Labuan, with a proposal framework being currently reviewed by the Ministry of Finance (MoF).
As reported by The Star, the minister of Domestic Trade and Cost of Living (KPDN), Datuk Armizan Mohd. Ali, has said that the mechanism for the proposed targeted diesel subsidy will be discussed with respective state governments before being fully implemented.
No Selective Implementations
The KPDN minister also dismissed claims that the government is being “unfair” by continuing to grant blanket diesel subsidies to Sabah, Sarawak, and Labuan, stating that the government’s goal is to provide subsidies through a more targeted distribution system.
“This is because the Federal Government has never mentioned that the targeted subsidy policy would not be applied in the three regions, but rather that it would be implemented in phases.
“In principle, the diesel subsidy will continue in Sabah, Sarawak, and Labuan, but it will be targeted to address risks of leakage, smuggling, and abuse,” he told reporters at the Sabah Hari Raya Open House last weekend.
When the Federal Government first introduced subsidy distribution, it was based on a targeted approach, adding that the policy will continue through improved distribution mechanisms. With the policy on subsidies representing a major shift, the government must carefully plan and implement them in stages.
“That is why in 2024, the government started with a targeted diesel subsidy in the peninsula. In 2025, we expanded the targeted approach to RON95 petrol nationwide, and both initiatives have run smoothly and will continue to be refined,” Armizan continued.
Mechanism to be Based on BUDI95
To ensure smooth implementation, existing fuel subsidy modes like the Budi Madani RON95 (BUDI95) could be used as a reference and guideline to the best mechanism for targeted diesel subsidies in Sabah, Sarawak, and Labuan. Having said that, the KPDN minister added that unique factors such as geography and logistics will be taken into account.
Ultimately, the implementation of targeted diesel subsidies in Sabah, Sarawak, and Labuan will only be considered in the next phase of execution once factors such as high reliance on diesel and significant price gaps between East Malaysia and Peninsular Malaysia are addressed.
