The subsidy for diesel will be withdrawn for the rich and foreigners, the Cabinet decided yesterday.

The diesel subsidy will first be rationalised in the peninsula.

The implementation in Sabah and Sarawak will happen later, said Prime Minister Datuk Seri Anwar Ibrahim.

“Almost all families in Sabah and Sarawak use diesel for transportation daily. Hence, we will postpone its implementation there,” he said in a national address last night.

The move, he said, would save the government roughly RM4bil annually.

The Prime Minister, however, did not indicate the implementation date for the subsidy rationalisation.

To prevent any drastic increase in the cost of goods and services in the peninsula, Anwar said subsidies would be continued for traders using diesel-powered commercial vehicles and for public transportation.

Ten types of public transportation vehicles, including buses and taxis, as well as 23 goods transport vehicles will come under the Subsidised Diesel Control System (SKDS).

Diesel subsidies will also continue for certain categories of fishermen.

The Prime Minister said cash aid would also be given for eligible individuals who own private diesel-powered vehicles such as small traders and farmers, among others.“Lower- and middle-income groups who use diesel for their businesses will not be affected by the rationalisation.

“The ones not benefiting are the T20 group and foreigners.

“Some may say we are raising costs, but we are only rationalising it so the subsidy will not be enjoyed by the wealthy and foreigners.

“Further details will be announced by the relevant ministry,” he added.

Anwar said there was room for those affected by the diesel subsidy withdrawal to refer the matter to the relevant ministries.

Meanwhile, he said an estimated total tax revenue of RM4.5bil would be generated through the introduction of Low Value Goods Tax, Capital Gains Tax and improvement on Services Tax.

Anwar said these taxes were introduced not to further burden the rakyat, but to expand the tax revenue base for the country.

“The goal for the Fiscal Responsibility Act (FRA) was to reduce the debt level to not exceed 60% of the Gross Domestic Product (GDP) and a fiscal deficit of 3% within the medium term,” he said.