Finance minstry considering targeted diesel subsidy for Sabah, Sarawak and Labuan in phases – KPDN

The ministry of finance is reviewing a proposed framework for the implementation of targeted diesel subsidy in Sabah, Sarawak and Labuan, the minister of domestic trade and cost of living Datuk Armizan Mohd Ali has said, reported The Star.

The mechanism for the proposed targeted diesel subsidy will be discussed with state governments before its implementation, Armizan said. The KPDN minister dismissed claims that the government is being unfair by continuing to Sabah, Sarawak and Labuan, and he stated that the federal government’s goal is to provide subsidies through a more targeted distribution system.

“This is because the Federal Government has never mentioned that the targeted subsidy policy would not be applied in the three regions, but rather that it would be implemented in phases. In principle, the diesel subsidy will continue in Sabah, Sarawak and Labuan, but it will be targeted to address risks of leakage, smuggling and abuse,” he said.

The federal government first introduced subsidy distribution based on a targeted approach, and the policies on subsidies must be carefully planned and implemented in stages as they represent a major shift, Armizan said.

That is why in 2024, the government started with a targeted diesel subsidy in the peninsula. In 2025, we expanded the targeted approach to RON95 petrol nationwide, and both initiatives have run smoothly and will continue to be refined,” he said.

Existing fuel subsidy models such as Budi Madani RON 95 (Budi95), the Subsidised Diesel Control Scheme (SKDS) and the Subsidised Petrol Control Scheme (SKPS) could be referenced as guidelines the best mechanism for targeted diesel subsidies in Sabah, Sarawak and Labuan, he said.

“Unique factors such as geography, logistics and other elements will be taken into account, as well as feedback from stakeholders,” he said. The KPDN minister added that it was important to note that targeted diesel subsidies, were also applied in the peninsula, and that the perception that they are not provided there must be corrected, he said.

Implementation of targeted diesel subsidies for Sabah, Sarawak and Labuan will only be considered in the next phase of execution due to various factors, such as the significant reliance on the fuel in the region, as well as the price gap between East Malaysia and Peninsular Malaysia, Armizan said.

Retail pricing for diesel is unchanged at RM2.15 per litre, though temporary restrictions will apply in the East Malaysian states aimed at combatting smuggling and leakage of the fuel, it was revealed during the announcement by prime minister Datuk Seri Anwar Ibrahim last week for the temporary adjustment of the monthly Budi95 quota to 200 litres.

Private and light commercial vehicles in East Malaysia will be limited to 50 litres of diesel per purchase, while land public transport and goods vehicles of no more than three tonnes will be limited to 100 litres of diesel per purchase. Vehicles exceeding three tonnes are permitted a maximum of 150 litres of diesel per purchase. The government added that enforcement will be strengthened to curb leakages.

For the week of March 26 to April 1, 2026, the price of Euro 5 B10 diesel in Peninsular Malaysia increased to RM5.52 per litre, while Euro 5 B7 diesel, at 20 sen more per litre, increased to RM5.72 per litre.

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