More Litres or Better Design? Rethinking How BUDI MADANI Reaches Malaysians

Prepared by Fairus Fauzi

7 October 2026

On 1 September 2026, the basic monthly quota for subsidised fuel under BUDI MADANI, a single allowance shared between RON95 petrol (BUDI95) and diesel (BUDI Diesel), returned to 300 litres, five months after it was lowered to 200 litres. Prime Minister Anwar Ibrahim said more than 16 million recipients would benefit. At the same time, the ceiling for over half a million owners of approved diesel pickup trucks and jeeps would rise to 400 litres. This was welcome news for households under cost-of-living pressure, while also inviting a closer look at whom the programme serves best. Moving Several Times Since Launch

Compiled from Ministry of Finance announcements and Malaysian press reports. Each adjustment came with a stated reason, and the ability to respond quickly to swings in global oil prices is a genuine strength of an executive-managed programme. Requiring every adjustment to pass through Parliament would be impractical, since a subsidy that waits for a sitting cannot react in time to an oil shock, and Parliament already scrutinises the programme through the budget. The more practical issue is predictability, because families and small businesses plan their spending weeks ahead and find this harder when the quota can change within days of an announcement.

Official Figures Suggest the Change Mainly Reaches a Small Group of Heavy Users

For petrol, Prime Minister Anwar Ibrahim said in March 2026 that about 90 per cent of users consumed less than 200 litres a month. In May 2026, Deputy Finance Minister Liew Chin Tong said that about 80 per cent used less than 200 litres and around 60 per cent less than 150 litres. In June 2026, however, Second Finance Minister Amir Hamzah Azizan told the Dewan Rakyat that fewer than one per cent of the 14 million registered BUDI95 users consumed more than 200 litres a month. For diesel, he cited Department of Statistics data showing that more than 80 per cent of users consume under 200 litres, with an average use of about 140 litres.

Read together, these figures indicate that the return to 300 litres raises the entitlement of all recipients, but changes the actual fuel bill of a much smaller group, namely those who regularly use more than 200 litres. This group deserves support, and economist Yeah Kim Leng has noted that it includes farmers, small traders and people with limited public transport, although the unpublished breakdown leaves unclear how many of these heavy users come from lower-income households and how many are higher-income motorists who simply drive more. Compared with the Old Blanket Subsidy, BUDI MADANI Has Delivered Clear Gains

Under the old blanket subsidy, everyone paid the same low price regardless of income or nationality. A 2022 parliamentary reply by the Ministry of Finance estimated that out of roughly RM27 billion spent on RON95 that year, the bottom 40 per cent of households received about RM6 billion, while the top 20 per cent received about RM8 billion. Diesel faced a different problem, as Amir Hamzah noted that monthly consumption had at one point risen abnormally from about 624 million litres to almost 1.2 billion litres, a pattern the government linked to leakage and smuggling.

BUDI MADANI has addressed these problems by limiting support to citizens through MyKad verification. Amir Hamzah reported that the RON95 reform freed about RM4 billion for aid programmes and expects BUDI Diesel to save up to RM2 billion a year, part of which has gone towards lowering the subsidised diesel price to RM2.10 per litre. When tabling Budget 2026, Anwar cited subsidy savings as the reason Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) could rise to RM15 billion for nine million recipients. Hong Leong Investment Bank also placed the theoretical maximum cost of the restored quota at 0.6 per cent of GDP for the rest of the year, noting that actual usage would keep it much lower. On these measures, the reform looks like a net improvement on what came before.

Paying Per Litre Still Gives More Support to Those Who Use More

Because both schemes deliver support per litre, someone who buys 300 litres a month receives roughly three times the subsidy of someone who buys 100 litres, regardless of income. Raising the ceiling for everyone is therefore a broad way of reaching a narrow group, even though the programme already contains more precise tools: E-hailing and commercial drivers receive mileage-based quotas, owners of pickup trucks and jeeps can apply for additional allocations, and fishermen, smallholders and public transport operators keep their own diesel subsidies. A similar supplementary route for hawkers and rural commuters could deliver relief to those who need it at a lower cost.

Malaysia Has Tried Both Cash and Litres

Diesel offers a useful local lesson on the mechanism. When diesel subsidies in Peninsular Malaysia were rationalised in June 2024, eligible individuals received monthly cash aid, which rose from RM200 to RM400 in April 2026. According to a Ministry of Finance briefing, this cash scheme reached only about 180,000 people, partly because recipients had to apply. BUDI Diesel replaced it in July with subsidised diesel at the pump, verified through the MyKad, for around 700,000 private diesel vehicle owners.The move from cash to a pump-based subsidy shows the trade-off between the two mechanisms quite clearly. Cash is worth the same whether a household drives a little or a lot, but an application step can leave many eligible people out. A pump-based subsidy, by contrast, reaches far more people with less effort but gives more to those who use more. Experiences in neighbouring countries point to similar lessons. When Indonesia cut fuel subsidies sharply in 2005, it paired the price increase with quarterly cash transfers to more than 19 million households, and research by Samuel Bazzi found that households whose payments arrived late reduced their spending noticeably. The Philippines, for its part, channels fuel aid through dedicated programmes for public transport drivers, farmers and fisherfolk.

Targeting Need Not Mean Sorting People

Some may feel that targeted support is dehumanising because it divides citizens into those who qualify and those who do not. The concern is reasonable, as development economist Thandika Mkandawire and others have observed that programmes requiring people to prove hardship can carry stigma and leave out eligible people through paperwork, a risk the low reach of the earlier diesel cash aid suggests is real in Malaysia too.

Yet a blanket approach is not automatically fairer, as the 2022 figures show. The real choice lies less between targeted and blanket support and more in the mechanism used. BUDI MADANI already avoids the most intrusive form of targeting, since no one has to declare their income at the pump, and its main gate is the driving licence. Amir Hamzah reported that 14.2 million of 16.7 million eligible individuals had used BUDI95 by August. Many of the remaining 2.5 million may simply not drive, but without a breakdown, it is hard to distinguish those who cannot easily reach the subsidy.

A better way to frame the path forward is automatic, needs-based support. Everyone eligible receives a basic entitlement without applying and extra help reaches those whom government records identify as needing it. Often called progressive universalism, this keeps the dignity of a universal programme while directing resources where they matter most.

PADU Already Holds Much of the Information Needed

At launch, Amir Hamzah explained that BUDI95 relied on only two checks, namely citizenship and a valid driving licence, and made limited use of the Central Database Hub, or PADU. PADU has since grown to hold the socioeconomic profiles of 30.7 million citizens and permanent residents, drawing on 670 datasets from 204 agencies, according to Economy Minister Akmal Nasrullah Mohd Nasir.

Within the safeguards of the Data Sharing Act 2025, PADU could address questions that the debate currently answers through assumptions. It could show the income levels and locations of people who regularly use more than 200 litres of petrol or diesel and estimate how many adults in lower-income and rural households hold no valid licence. It could also show how the individual quota translates into support per household, since a household with several licensed adults receives a larger combined entitlement than one with a single driver. Finally, it could identify hawkers and others already registered with government agencies, allowing supplementary quotas to be granted automatically, combining the reach of the pump-based subsidy with the precision that cash aid was meant to offer. Presenting these quotas alongside STR and SARA, which the Ministry of Finance says are partly funded by diesel savings, would also help households see fuel subsidies and cash support as one package. Where This Leaves the Debate

On balance, the evidence suggests that BUDI MADANI has been a net positive step compared with the blanket subsidies it replaced, having reduced leakage on both fuels, limited support to citizens and helped fund larger cash transfers. The return to 300 litres offers real relief to a smaller group of heavy users at a modest fiscal cost.

The main concern is mechanism rather than direction, as a per-litre quota still gives more to those who use more, the driving licence remains an unmeasured gate, and the data needed to judge who is being reached already exist within the government. Three steps could strengthen the programme without slowing it down, namely publishing a simple guide on how the quota will respond to oil prices and fiscal conditions with reasonable lead time before changes, releasing regular summary data on petrol and diesel usage by income group and region, and using PADU to extend additional support automatically to those who need it. Such steps would help a reform that already works reasonably well become one the public can understand, anticipate and trust. References

Bazzi, S., Sumarto, S., & Suryahadi, A. (2015). It’s all in the timing: Cash transfers and consumption smoothing in a developing country. Journal of Public Economics, 128, 17–29.

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