This is based on the unsubsidised market price, according to the Automatic Pricing Mechanism formula for last month.

The weekly retail price of unsubsidised diesel will subsequently be announced every Wednesday based on the formula, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

For those in Sabah, Sarawak and Labuan, the price will remain at the subsidised rate of RM2.15.

The announcement is part of the government’s policy to reform fuel subsidies where they will no longer be given at the pump.

Instead, diesel subsidies will be given out to targeted recipients under the Bumi Madani cash scheme and the fleet card system called the SKDS (Subsidised Diesel Regulation System Pilot Project).

“The government expects to save about RM4bil annually through the targeted subsidy for diesel,” Amir Hamzah told a press conference yesterday.

He said the implementation of the targeted subsidy for diesel is necessary because billions were lost annually due to smuggling activities.

“For example, subsidies for diesel had increased 10-fold in the past five years.”

The government, he said, spent about RM1.4bil for diesel subsidies in 2019, with the amount increasing to RM14.3bil last year.

He also noted that the demand for diesel had gone up from 6.1 billion litres in 2019 to 10.8 billion litres last year, although there had been no significant increase in the number of diesel vehicles in the country.

“Malaysia can ill-afford to continue losing billions of ringgit to smuggling, which could otherwise be better spent to benefit Malaysians and develop our nation,” he said.

Unsubsidised diesel would make diesel smuggling less profitable, he said.

Amir Hamzah acknowledged that the decision to do away with diesel subsidies “was not an easy step to take” but a necessary one.

“We did not rush into it but gave attention to the best mechanism available to protect relevant sectors while not causing disruptions to the lives of the people,” he said.

Asked if the government would be willing to fine-tune the diesel subsidy rationalisation initiative following feedback after its implementation, Amir Hamzah said that it will go ahead as planned for the time being.

“Let it run through and see how it develops.

“If there are material gaps, we will look into them. But there is sufficient existing data for us to go ahead with the targeted subsidies,” he said.

With the exception of Brunei, where diesel is priced at RM1.09 per litre, the cost of the fuel elsewhere is well above the float price of diesel in Peninsular Malaysia.

Diesel is being sold at RM8.74 per litre in Singapore, Thailand (RM4.24), the Philippines (RM4.75), Indonesia (RM4.43), Cambodia (RM4.64), Myanmar (RM5.40), Laos (RM4.56) and Vietnam (RM3.69).

The fuel subsidy rationalisation plan was announced by Prime Minister Datuk Seri Anwar Ibrahim during the tabling of Budget 2024.

Last month, Anwar said subsidies for diesel would be withdrawn for “the rich and foreigners”.

The targeted subsidy for diesel is among the key reform measures in Malaysia to ensure sustainable fiscal management and to address the issue of leakages within the system.