BUDI95 Initiative Targets Fairer Subsidy, Boosts Income Equity --  Economists

By Engku Shariful Azni Engku Ab Latif

KUALA LUMPUR, Oct 1 (Bernama) -- The BUDI95 petrol subsidy initiative strengthens income distribution and could improve fairness in how national resources are shared by five to 10 per cent, in line with ASEAN peers, an economist said.

Research firm IPPFA Sdn Bhd director and country economist Mohd Sedek Jantan said this could be achieved by shifting from a regressive subsidy, in which the top “quintile” captures between 70 and 80 per cent of benefits, to a progressive framework.

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"The BUDI95 mechanism, by integrating MyKad with government databases and restricting subsidies to designated petrol brands, facilitates more precise targeting of beneficiaries and curtails misuse by ineligible recipients. This strengthens fiscal consolidation by reducing leakages and broadens fiscal space for more productive expenditure," he told Bernama.

Mohd Sedek said that in the medium term, BUDI95 is expected to help stabilise transportation cost, which is a major factor influencing both consumer and producer price indices.

By dampening volatility in petrol expenditure, he said the scheme is likely to preserve household purchasing power and raise real disposable incomes, particularly among lower income groups, where fuel can account for up to 10 per cent of household budgets

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Mohd Sedek also suggested that the government integrate the scheme within a broader digital identity and payment ecosystem by linking MyDigital ID to subsidy allocation, which would not only standardise access but also extend functionality to adjacent public services, creating system-wide efficiency gains. 

He said BUDI95 can also be linked to services such as toll exemptions, traffic summons payments, or licence renewals, thereby normalising digital ID adoption. 

"The resulting efficiency gains - potentially in the order of one to two per cent of GDP- would reinforce fiscal sustainability. By embedding subsidy rationalisation within a wider GovTech strategy, the government ensures that BUDI95 is not merely a subsidy programme but a catalyst for structural transformation towards a more digital, inclusive and resilient economy," he added.

Putra Business School economic analyst associate professor Dr Ahmed Razman Abdul Latiff said the BUDI95 initiative allows consumers to save on transportation, leading to higher disposable income. 

However, he said the risk of the programme would lie in the technological challenge of using MyKad, which has non-functional chips.  He also pointed to the possibility that some individuals might sell the unused fuel quota to other individuals and smuggle it to neighbouring countries.

"Therefore, the country’s central database system (PADU) database needs to be updated so that the government can match the MyKad with the number and type of vehicles each individual owns and monitor the monthly trend to detect any element of smuggling or selling the quota to others," he added.

BUDI95 is implemented from Sept 30, involving 16 million Malaysians who hold a MyKad and a valid driving licence.

The public can obtain more information by referring to the ‘Frequently Asked Questions’ section on the official BUDI95 portal at www.budimadani.gov.my or by contacting the helpline at 1-300-88-9595.

-- BERNAMA