Malaysia sounds the alarm, fuel subsidy scheme exploited by smugglers at Thai border

KUALA LUMPUR: Malaysia’s new petrol subsidy programme is raising alarm bells, with early data pointing to possible abuse — particularly in northern states bordering Thailand. Officials are now grappling with suspicions that the scheme, meant to ease costs for ordinary citizens, may be fuelling a booming black market for smuggled fuel.

The Budi95 scheme, rolled out on Sep 27, allows eligible Malaysians to purchase RON95 petrol at a heavily subsidised rate of RM1.99 (S$0.61) per litre — well below the market price of RM2.60. Each individual can claim up to 300 litres per month, which the government insists is more than enough for normal personal use.

However, less than a month in, the numbers are telling a different story.

A pattern emerging at the border

According to Treasury Secretary General Johan Mahmood Merican, several users — especially those in border states — have already burnt through their entire quota in just weeks.

“Some 80 individuals, all holding only motorcycle licences, consumed 300 litres in two weeks,” Johan said. “That’s the equivalent of riding more than 500 kilometres a day — a highly unlikely pattern for regular users.”

Officials suspect that such usage isn’t due to long commutes or joyrides — but instead points to a well-known issue: cross-border fuel smuggling.

Old problem, new opportunity

Fuel smuggling along the Malaysia-Thailand border is nothing new. The 130-km stretch between Kelantan and southern Thailand has long been a hotspot for this illicit trade, with subsidised Malaysian petrol resold across the border for hefty profits.

With RON95 priced far below regional averages — including RM5.68 per litre in Thailand and RM9.02 in Singapore — Malaysia’s fuel has become an irresistible target for smugglers.

Authorities have flagged at least 48 petrol stations near the Thai border as “high-risk,” with reports of station staff and locals colluding to bypass regulations. Now, the Budi95 subsidy appears to be adding fresh fuel to the fire.

System gaps creating profit loopholes

Economists argue that the scheme’s design may be flawed from the start. Geoffrey Williams, director of Williams Business Consultancy, says the blanket quota of 300 litres per person far exceeds what most Malaysians actually need.

“Most people use under 180 litres a month, and motorcyclists often only need around 60 litres,” he said. “That leaves a surplus, and where there’s surplus in a subsidy system, there’s opportunity for abuse.”

That “extra” fuel — whether resold locally or smuggled out — turns into quick cash. Williams estimates that a person could earn up to RM73 a month in pure profit just by reselling unused subsidised fuel — a figure that surpasses some monthly welfare payments.

Rural needs vs smuggling rings

Still, not everyone agrees that the data tells the full story. Ahmad Mohsein Azman, a senior analyst at BowerGroupAsia, warns against rushing to conclusions.

“Border areas aren’t just about smuggling. They’re also where roads are long, public transport is scarce, and people genuinely drive more,” he said. “Fuel usage in rural regions might legitimately be higher.”

He argues that enforcement alone won’t solve the problem. Rather, a united Malaysia-Thailand plan of action is required to respond and deliver economic inducements and reduce enforcement disparities.

What’s next for Budi95?

Since its introduction, more than 12 million Malaysians have enlisted in the Budi95 system, with the Finance Ministry documenting 3 million transactions every day. However, with abnormalities stacking up, the programme is under rigorous examination.

The government is now confronting a balancing act — guarantee that subsidies reach those who genuinely need them, while fastening the net on those taking advantage of the system for felonious gains.

One thing is clear — if left unrestrained, what began as a well-meaning initiative to assist people could end up driving up a shadow economy that’s difficult to control.