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Fuel subsidies are expected to stay high at RM40 billion in 2027, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim announced on Friday (9 October).
Presenting Budget 2027 in the Dewan Rakyat, Anwar said total spending on subsidies, aid and incentives will exceed RM80 billion next year.
Fuel Subsidies And The Deficit
Anwar said the West Asia crisis pushed fuel subsidy costs to RM40 billion.
The 2026 fiscal deficit is now projected at 3.6%, against the original target of 3.5%.
The 2027 deficit is projected to fall to 3.3%, heading towards 3% by 2028. The deficit was 5.5% in 2022 and 3.7% last year.
Anwar said Malaysia withstood the impact of the West Asia conflict, but the energy transition agenda must be stepped up to secure long-term supply.
He added that the savings were channelled into STR SARA (the government’s targeted cash aid programme), which rose from RM8 billion in 2022 to RM15 billion this year.
Electricity And Fuel Quotas
Last month, the government raised the electricity bill protection threshold from 600 kWh to 800 kWh a month. This benefits over 8 million users, or up to 90% of domestic consumers.
The government also raised BUDI95 eligibility to 300 litres a month, and BUDI Diesel for jeeps and pickups to 400 litres.
Based on September records, only about 100,000 users – under 1% – used the full 300-litre BUDI95 quota, while just 15,000 diesel users of jeeps and pickups reached the 400-litre cap.
Grid And Renewable Energy
TNB will invest RM15 billion to strengthen the national grid to sustain electricity demand.
UEM Lestra will invest RM1 billion across projects including energy storage at KLIA and a 1GW hybrid energy project in Johor.
KWAP’s (Kumpulan Wang Persaraan, the civil servants’ pension fund) RM1 billion Climate Fund will go to green projects such as renewable energy and decarbonisation.
A centralised solar park for government buildings will be developed with a RM1.5 billion investment. It provides opportunities for 34 Bumiputera construction, engineering and maintenance companies.
Under the LSS6 (Large Scale Solar 6) solar project, 150MW is reserved for Bumiputera companies.
Energy Efficiency And Green Incentives
Through NUR MADANI, rebates of up to RM200 will be given to buyers of energy-efficient air-conditioners and refrigerators. Anwar said hot weather has contributed to higher household electricity use.
Companies that carry out green and sustainable technology projects and operate electric vehicle charging stations can claim an Investment Tax Allowance of up to 100%.
Companies that buy green technology assets for their own use qualify for the same allowance.
Both incentives are extended to 31 Dec 2030.
The Malaysian Highway Authority will provide 50 electric vehicle charging facilities at strategic locations.
Petronas And Pengerang
Petronas will take full ownership of the Pengerang Integrated Complex, strengthening its role as a strategic fuel supply hub, anchored by a biorefinery with Enilive and Euglena that will produce Sustainable Aviation Fuel, HVO, and bio-naphtha.
Beyond Pengerang, Petronas is expanding into LNG Canada Phase 2, a petroleum discovery in Suriname, and the Galkynysh natural gas field in Turkmenistan – one of the world’s largest – while Petronas and TNB jointly participate in the cross-border ASEAN Power Grid project.
Sabah And Rural Areas
Sabah receives a significant autonomy upgrade, with electricity regulatory powers transferred to the state and RM600 million in federal funding to ensure supply continuity.
Rural communities across Malaysia will benefit from RM3.3 billion in basic infrastructure, covering clean water, electricity and connectivity – with TNB and telcos pooling CSR funds alongside government allocations.
The government will install Statcom systems at the Dam Road and Segaliud main intake substations in Sabah at a cost of RM204 million. The Southern Link transmission line project continues.
Electricity regulatory powers have been handed to Sabah, while the federal government will provide RM600 million to ensure supply continuity.
TNB is installing solar street lights in villages, and rooftop solar panels at welfare homes and houses of worship. Electricity supply is also being improved at tahfiz schools, pondok and Orang Asli villages.
Costs For Contractors And Fishermen
The Variation of Price clause will be reintroduced to cover higher diesel and bitumen costs in contracts.
Eligible fishermen will continue to receive subsidised diesel at RM1.65 a litre.
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