Friday, January 22, 2010

Only in Malaysia – “Some things are simply impossible” by P. GUNASEGARAM

Two prices for petrol won’t work, not even in Malaysia

IT IS May 1. Malaysia is in the midst of a major experiment. It is, in the true spirit of “Malaysia Boleh”, embarking on something that had never before been done anywhere, anytime successfully.

If we succeed, it would be yet another world first. It would dwarf the Petronas twin towers in terms of impact. Climbing Everest – which has been done by over 1,500 people – will be nothing in comparison.

Sailing around the world has been done many times before and is no longer necessary since we have powered boats, but that will be a tiny drop in the oceans sailed compared with what we are attempting to do now.

On that day, I take my 20-year-old BMW 525i — those of you who know cars know that it has a 2.5 litre engine but the car value is less than RM25,000, way below the price of any new car — to the petrol station.

I go to the pump where petrol costs RM1.80 a litre, but no, they look at my car and say that it definitely does not have an engine capacity of 1.6 litres or less. That means I can’t fill up there, they say. Go that way and pay RM2.10 a litre.

Why? I asked. I am not rich, but I am not poor either. Why ask me to pay the price the rich pay for their petrol? Just because I drive a high engine capacity car (its terribly old, by the way), does that mean that I am rich and therefore must pay more for my petrol?

The petrol pump attendant looks askance at me. He’s pleading with his eyes. Behind me, a Haji waits with his old Mercedes Benz in tense negotiation with another pump attendant. There are three or four negotiations going on.

In petrol kiosks across the nation these scenes are repeated – it takes 30 minutes to fill up your tank even if you drive a car with an engine capacity of 1600cc or less. But then, this is Malaysia, the land where anything can, and does, happen.

By this time, the petrol attendant has a twinkle in his eye. “Sir,” he begins, hopefully, “you fill up your tank at the old price, but you just pay RM5 to me, OK? You win, I win.”

I do some quick calculations. A full tank will mean at least 60 litres. At 30 sen a litre, I save RM18. Give him RM5 and I am still RM13 up. Yes, that’s a good deal, far better than having to pay RM18. I signal to him.

In a thrice the price changes on the display. I fill up, and surreptitiously hand over the five bucks. I saunter over to my car, start it and nonchalantly drive away. Another day in boleh-land.

Poor Pak Haji has more scruples. He continues to protest but for him, poor as he was, it will be higher prices for petrol. But unlike Pak Haji, most people are quite happy to avoid paying their dues to the Government.

Back home, I turn on the TV to watch the Domestic Trade and Consumer Affairs Minister aver that this latest move to have one price for the rich and one for the poor will save the government hundreds of millions of ringgit a year. Really?

You might know that we already have had two prices for diesel. Fishermen pay lower prices. Can you guess what happened? Their consumption of diesel increased considerably – I think it was two- or three-fold over two to three years. But here’s the strange thing: the amount of fish caught did not – it declined!

How is that? I don’t think they went on joy rides on subsidised diesel. There is just one explanation – the fishermen, at least some of them, were siphoning off the diesel to sell it to others at higher prices.

It made them richer, but I am sure that was not the way the Government – or the public – wanted it.

When you subsidise everyone, it is easy. One price for everyone. The only problem is smuggling across the borders. And since oil is a bulky item that requires considerable storage capacity, it is not easy, provided Customs officials are straight and vigilant.

Oh, Malaysia, my heart bleeds for this country of mine (and yours too). The solution is so simple and yet we don’t see it – which has to mean that we don’t want to see it. We want to touch our noses by moving our hands behind our heads first.

There is just one way to solve the subsidy problem – much like the solution to the AP (approved permit) problem. Simply abolish it – and that goes for the associated taxes too. (If we have a tax that is greater than the subsidy, we are NOT subsidising the product.)

That way, everybody pays the true price of goods. If prices go up, we all pay for it. If prices go down, we all benefit from it. If we use more of it, we will pay more, and vice versa. The rich will use more oil and they will pay for it. The poor use less and pay less. Simple.

We must have just one price for one grade of product. If the world price moves too high, and considering that we are net exporters of energy, we may choose to subsidise the oil price. But still, one price is what we must have. Anything else spells disaster.

If the Government wants to relieve the burden on the poor, then simply establish an effective, tamper-proof, independent and objective system to determine who are the poor and give the money directly to them.

Some things are impossible, notwithstanding our penchant to try for the unachievable. When there are two prices for the same product at the same place, then someone other than the Government will benefit from arbitraging between the two. You can bet your life on that.

Managing editor P. Gunasegaram hopes that no enforcement officer comes knocking at his door. He was merely building a scenario and has no intention of paying any money under the counter. Promise!

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