MOF defends diesel subsidy reform after Sabah and Sarawak sales double expected demand
Diesel sales in Sabah and Sarawak surged to roughly 200 million litres a month in March and April, almost double the level implied by the number of registered diesel-powered vehicles in both states.
Source: The Vibes · July 24, 2026 at 5:17 AM · AI-assisted report
Single-source
SABAH AND SARAWAK, 24 JULY 2026 —
Diesel sales in Sabah and Sarawak surged to roughly 200 million litres a month in March and April, almost double the level implied by the number of registered diesel-powered vehicles in both states.
Market Impact
The Finance Ministry (MOF) told Senator Datuk Nelson W. Angang that the spike was one of three reasons the government decided to overhaul Malaysia’s diesel subsidy regime after prices rose to RM2.15 a litre in the two states. Authorities said the price gap with neighbouring markets encouraged smuggling and allowed non-citizens who were not entitled to the subsidy to buy cheap diesel.
The ministry also cited the jump in fuel-subsidy spending after global oil prices rose and supply risks from the West Asia conflict that threatened national fuel security, along with the success of the BUDI95 programme’s MyKad-based checks that verified eligibility for subsidies.
On June 21 Prime Minister Datuk Seri Anwar Ibrahim announced a nationwide standardisation of pump prices at market rates while introducing a single verification system for subsidies. Under the new plan, eligible Malaysians use MyKad to claim RON95 and diesel subsidies, and the subsidised diesel price for qualified buyers was cut to RM2.10 a litre.
MOF said its diversification of supply sources and safeguards for energy security would be undermined unless leakage of subsidised diesel to unauthorised users was stopped.
The problem was most acute in Sabah and Sarawak, where non-citizens bought subsidised diesel at RM2.15 a litre.
“The price gap with neighbouring countries has created smuggling opportunities that are hard to stem even with stronger enforcement,” the ministry said.
MOF added that the BUDI MADANI reforms aim to deliver two main results: a steady domestic supply of diesel and continued lower-price purchases for eligible Malaysians.
By setting diesel at market levels, the ministry expects to cut smuggling and misuse by non-citizens and industrial buyers, protecting domestic fuel supply.
The reform is forecast to save up to RM2 billion in annual subsidy outlays, part of which will fund the cut in subsidised diesel from RM2.15 to RM2.10 a litre.
“This lets Malaysian citizens buy diesel at a lower price as a citizenship benefit,” MOF said.
The ministry also pledged to shield households and small and medium enterprises from the effects of targeted fuel subsidies.
“The reform lets the government expand targeted aid, raise disposable income and support the broader economy,” it said.
Related: Ministry of Finance (MOF) · Sabah and Sarawak