Subsidy or Cash?

This is an excellent article on this topic.

I don't understand why political parties don't use it as part of their
campaigns.

Malaysians must get rid of themselves of the subsidy mentality,
thinking that these subsidies are for free. Instead of demanding
subsidies, they should demand cash instead. The savings that the
government got from removing subsidies must be returned to the people
via cash handouts.

This is very important for Malaysia because it is the only way we can
save this nation. Too much subsidies will cripple our nations. Cash
handouts is also a form of subsidy but it is much more effective in
alleviating the hardships of the people instead of the wastes that
subsidies creates. It is also the most effective form of social
welfare and easiest to implement.

The easiest form of such handout is just an equal distribution of cash
to everybody, regardless of income and age. It means that infants will
get as much as adults. Everybody will a winner except those who waste
petrol. For tax payers, it is just a rebate for them. For non-tax
payers, they will receive cash from the government.

http://www.malaysiakini.com/letters/77041

Use petrol subsidy to subsidise poor
Noor Hamzah | Jan 15, 08 3:00pm

I do not support commodity price subsidy. Full stop. Subsidy on the
price of an essential item, be it rice, sugar, water or petrol and
diesel will only skew the consumption behaviour of consumers.
Consumers tend to consume more of the subsidised item, which has been
made relatively cheaper that other alternatives. This makes
alternative products uneconomical as they are unable to compete based
on price.

True, petrol and diesel are the basic necessities for downstream
products. Anything that requires transport from the producer to
consumer more than likely has the petrol component included in its
final price offered to consumers.

So the theory goes that by subsidising petrol and diesel, other goods
and services will not increase in price. How true. But that stance
doesn't encourage consumers, ie. the Malaysian people, to search for
alternatives. By alternatives, I do not mean just biodiesel.

What if we change the way we do things? Do we have to commute everyday
to offices, factories and drive our car to supermarkets to buy food?
Do we have to drive our kids to school every morning? What if we
collectively find other ways to reduce petrol consumption? Its price
is the big determinant that will push us to change our way of doing
things.

The poor villagers on bicycles do not have much use for the petrol
subsidy as the city dweller in Taman Tun Dr Ismail in KL who has four
cars in the porch.

Let us consider this scenario, let's say the government tomorrow
removes the subsidy on petrol and diesel. So prices rise to the world
market price of about RM2.60 a liter for petrol. So a raft of other
products and services would also increase in price such as food
prices, bus fares and transportation costs.

People would then change their way of doing things. And firms would
also change their way of doing business. I would expect people would
make less shopping trips besides reducing their commuting. Firms would
do more of their business online, and their office workers would do
most of their work online from home, reducing the need to commute to
office.

In my opinion, we have to move on and accept the fact that oil prices
will stay high up for the foreseeable future. Let's accommodate that
into our planning for the country. The sooner we accept that the
better.

Now, what will the government do with the billions of extra oil
revenue? Surely, you can't just use it to buy another Scorpene
submarine or two? That will be the time for the government to announce
that it will subsidise poor Malaysians earning below a certain amount
to relieve them of their burden.

Najib Razak, do announce that the government will give RM200 a month
to lower income Malaysian households, on a per household basis
provided that the combined income is less than RM1,500 a month. For
those with household incomes higher than RM1,500, the subsidy should
be on graduated basis with no subsidy for households earning over
RM3,000.