IN addition to the proposals for differentiating petrol into two categories and providing cash instead of subsidised diesel to needy groups, the government could also consider introducing a variation of the Indian ration card to suit local needs now that prices are spiralling.

The present fuel subsidy system is ineffective and inequitable as both the haves and the have-nots benefit, instead of the latter only.

The government could introduce the “subsidy card scheme” for those drawing a monthly salary of less than RM800. The poor groups will be given a subsidy card (similar to the MyKad) after their application has been processed.

The monthly disbursements for the card holder should be limited to, say, RM500. At the beginning of every month, the card holder should go to a nearby supermarket and present the card to buy essential household items valued at say about RM500. Only supermarkets should be included in this scheme to ensure that the incentive is not abused.

By this method, the government will be able to help all deprived groups, including the hard-core poor, who have not been reached under the various poverty eradication schemes.

It will also be an alternative to the minimum-wage scheme which the government is hesitant to implement as it fears that it will drive away investors and employers.

For the scheme to be effective, it should be confined to those who work but are unable to draw a reasonable salary to offset the cost of living. The scheme will also motivate the poor to work in order to qualify for the benefit.

Possibly only half or less of the present annual RM30 billion fuel subsidy needs to be utilised for this scheme. The rest could be ploughed back for development, thereby freeing the government of a major burden. The government can then order that fuel, petrol, diesel and gas, be sold at market prices as the poor will have been well taken care of under the subsidy-card scheme.

It will also end the rampant abuses that plague the diesel subsidies. The subsidy-card scheme will benefit only the poor, unlike now when the general subsidy system benefits the rich more as they have more vehicles than the poor.

V. THOMAS, Sungai Buloh, Selangor

Source: NST – May 2, 2008