M40 Group May Be Excluded From Fuel Subsidy By Mistake - Kenanga

Kenanga Research, the research division of Kenanga Investment Bank Bhd, has expressed worries that the planned targeted fuel subsidy may exclude a substantial percentage of the M40 group, resulting in a reduction in discretionary income soon.

The upcoming tailored gasoline subsidy, scheduled to be announced during the presentation of Budget 2024 on October 13, is anticipated to replace the existing blanket fuel subsidy due to unsustainable budgetary burden. Fuel subsidies in 2022 were given a significant 35 percent of the RM77.3 billion budget for subsidies, with the majority of the money going to the wealthier T20 group.

The Inland Revenue Board (LHDN) and the Road Transport Department (JPJ) are just two of the government organisations whose data is combined in the new Central Data System (PADU) database, which will be used by the government to address this issue. The government wants to use this database to identify people who get subsidies based on their "net disposable income," primarily with the intention of excluding the T20 group.

Despite these initiatives, Kenanga Research is concerned that the M40 group as a whole may mistakenly be excluded from the new fuel subsidy programme. This group may see a decline in disposable income and lower purchasing power as a result of this exclusion.

However, the B40 group, which is the target market for consumer staples companies, will continue to benefit from subsidised fuel, guaranteeing that their purchasing power is untouched.