The fuel subsidy chase

THE issue of fuel subsidies and how the Government plans to execute it has picked up in recent months. The industry is well aware that the Government is determined to ensure that the leakages are plugged as it seeks to reduce its subsidy bill.

Towards this end, it is understood that seven companies have recently put in bids to assist the Government achieve this goal.

The market first became aware of the fuel subsidy project when the Domestic Trade, Cooperative and Consumerism Minister said it would introduce a new system as early as September this year that would curb abuses and leakages in the distribution of subsidised diesel and petrol.

While the proposed methods of achieving this may differ, all are proposing a fuel subsidy mechanism to address abuses and to “tier” the general public based either on their salaries or engine capacities.

One of the contenders is a joint venture of Datasonic Group Bhd and Pos Malaysia Bhd, which is said to have submitted its proposal via Fuelsubs House Sdn Bhd.

While Datasonic will put to use its expertise in the usage of smartcards, Pos Malaysia will exercise its logistical strength of more than 700 post offices to manage the registration of subsidised fuel applications.

On Wednesday, Datasonic told Bursa that it will pay RM10mil for a 30% stake in Fuelsubs House.

The acquisition is conditional upon Fuelsubs securing a letter of award from the Government to implement the project.

Other companies which have reportedly submitted proposals include MyEG Services Bhd, Iris Corp Bhd, ICash Global Rewards Sdn Bhd and MOL AccessPortal Sdn Bhd.

When asked by reporters, MyEG’s executive director Datuk Raja Munir Shah Raja Mustapa has neither denied nor confirmed whether the company has submitted its proposal.

MyEG, via its 40% subsidiary MyEG Integrated Network Sdn Bhd, recently bagged the electronic monitoring system project which entails linking up the point-of-sales terminals at entertainment and retail outlets to the Customs Department to facilitate the collection of taxes.

Online service payment provider MOL Access, which will be listed on the Nasdaq market sometime this year, is known to be tycoon Tan Sri Vincent Tan’s tech vehicle.

In February this year, the Sultan of Johor bought 15% stake in MOL for US$120mil (RM396mil) as a pre-IPO deal.

As for Iris, it was the original creator of the MyKad, where it was the sole provider of that service from April 2001 to 2010. Subsequently, Datasonic took over the job.

Earlier this year, Iris again garnered attention when Felda Investment Corp (FIC) bought a 25% stake in the company. FIC was criticised for the deal, but it defended itself by saying that FIC was hoping to ride on the company’s agriculture technology and merge it with Felda agriculture’s businesses to extract better value creation.

Another company that could potentially handle this job is Dialog Group Bhd. Back in 2008, it was the first company to propose a system of paying petrol using the MyKad system.

If one recalls, the setting up of a fuel subsidy scheme is nothing new. Back in 2008, Dialog Group Bhd formed e-Petrol Services Sdn Bhd with the purpose of tiering petrol use based on one’s MyKad.

The pilot project was launched in November 2008. Basically, consumers would pay for petrol using their MyKad. An ePetrol kiosk was set up in selected petrol stations. How it worked was, a person’s MyKad was linked to his bank account, thus the MyKad was used to pay for petrol at the petrol station.

The cash would be deducted from the bank account associated with one’s MyKad account.

This scheme was to ensure that fuel subsidies would be controlled and given to Malaysians only. Nonetheless, the project never took off.

In March 2010, then Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri said the tiered fuel subsidy plan had been scrapped. Furthermore fuel prices would not be increased.

Nonetheless the system is in place.

In April 2009, Dialog Group’s executive chairman Dr Ngau Boon Keat and his wife set up the MyKasih Foundation to help low income families through food aid and education.

The MyKasih programme runs on the ePetrol cashless platform. Today it has a total outreach of 170,545 recipient families through the MyKasih food aid and student bursary programme.

It is now spearheaded by Pemandu in partnership with the Health Ministry and the Sarawak government.

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