Malaysia to restrict fuel sales to foreigners

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Kuala Lumpur, May 27:: Malaysia will restrict sales of petrol and diesel to foreign motorists from Saturday to prevent abuse of fuel subsidies, Bernama news agency reported, a move that could hamper tourism and upset retailers.

It quoted Domestic Trade Minister Shahrir Samad as saying late on Monday that some 200 to 300 filling stations in Malaysian towns bordering Singapore and Thailand will be barred from selling fuel to non-Malaysian registered vehicles.

Malaysia, a non-OPEC oil producer and net exporter, has some of Asia's lowest diesel and petrol prices due to high government subsidies.

Malaysia has said its subsidy bill could hit a record of 50 billion ringgit ($15.52 billion) this year as crude oil prices touched all-time peaks of above $135 a barrel last week

The country shares land or sea borders with Brunei, Indonesia, Singapore and Thailand.

In the case of Thailand, the ban will apply to petrol stations located within 30-50 km (19-31 miles) of the Malaysian border with its northern neighbour, Shahrir said after attending a meeting to combat inflation, which is at a 15-month high.

"This move is a stern action by the government to reduce the leak in subsidies that involved high cost and which should actually be enjoyed by the lower-income group in the country," he said.

Economists said the new rule could be the start of a series of measures as the government battles to lower its rising subsidy bill.

Instead of totally removing the subsidies, government officials have touted in recent months the idea of a two-tier scheme, under which the rich pay more for petrol while others continue to enjoy subsidised prices. The move to limit fuel sales to foreign motorists is more stringent than the earlier proposal to make them pay unsubsidised rates.

"The government has said it's not going to hike fuel prices, so I guess there would be more announcements to come," said Gundy Cahyadi, an economist at Ideaglobal in Singapore.

"Being a net exporter of petroleum, Malaysia has its edge. It's not going to be detrimental to the budget for now," said Cahyadi.

Hundreds of Thai and Singapore motorists cross into Malaysia daily to seek cheaper diesel and petrol.

Shahrir said the ban would be in force until the government introduced a new subsidy scheme to prevent such leakages.