Petronas profits don't go directly to fuel subsidies

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NST Online
June 10, 2008

By : Deborah Loh


PUTRAJAYA,

Petronas’ profits do not go directly to petrol and diesel subsidies but to a government fund that is disbursed for development projects and various types of subsidies. Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said Petronas’ direct subsidy was only for gas used by power producers to generate electricity.
He was explaining the link between Petronas’ earnings and fuel pump prices following the government’s move to raise the price of petrol by 41 per cent and diesel by 63 per cent last Wednesday. The issue of cutting fuel subsidies has always drawn negative reactions about Petronas from the public and Opposition parties, who question why Petronas’ profits cannot be used to subsidise pump prices.

“Except for gas, Petronas’ profits are given to the government, which puts them in a consolidated fund from where they are used for various types of subsidies, including subsidising the oil price for consumers, for agriculture, padi planters, on education, welfare, food and others. Subsidies for these things come from, among various other sources, Petronas’ income,” Shahrir told reporters yesterday after launching the Companies’ Commission Annual Report 2007.

He said the petrol and diesel subsidy was paid to oil companies from government revenue. While Petronas could highlight the importance of lifting fuel subsidies completely for the country’s future, it was ultimately the government’s decision to do so, he said.

Petronas president and chief executive officer Tan Sri Mohd Hassan Marican said at the 13th Asia Oil and Gas Conference on Monday that removing energy subsidies was a “matter of survival” for future generations, and not simply about saving costs.
Shahrir said the government had to perform a balancing act between the amount of subsidies to retain and ensuring that the people did not waste them.

“With subsidies, the price of our assets and resources will not be valuated at their true value. We have to balance – helping the people face higher cost of living while ensuring that our country’s resources are not depleted. Subsidies will never be 100 per cent but neither will they ever be lifted fully,” he said, reiterating that Malaysia’s oil reserves were estimated to last till 2014, after which the country would be a net oil importer.

Shahrir said the government would hold monthly reviews of the pump price of petrol and diesel according to the market price and make decisions accordingly.