THE Malaysian government has been urged to revamp its household income classification model to ensure that any forthcoming reform of petrol subsidies for higher-income earners is implemented in a more transparent, accurate and equitable manner.
Economist Emeritus Professor Dr Barjoyai Bardai said the long-standing B40, M40 and T20 income grouping no longer adequately reflects Malaysia’s current socioeconomic realities, particularly the widening disparities in living costs between urban and rural regions.
He said a more sophisticated, multi-dimensional classification system should be introduced to assess household financial capacity more accurately, taking into account not only income levels but also assets, geographical location, number of dependents and overall spending patterns.
“An income of RM15,000 in Kuala Lumpur is not the same as RM15,000 earned by a household in Kota Bharu, because living costs in major cities, medium-sized towns, rural areas, as well as Sabah and Sarawak, differ significantly,” he told Bernama.
Barjoyai, who serves as Provost and Dean of the Institute of Graduate Studies at Universiti Sains dan Teknologi Malaysia, said a scoring-based approach would provide a more realistic picture of financial resilience and reduce reliance on gross monthly income as the sole indicator of economic status.
He also cautioned that poorly designed subsidy reforms could deepen what he described as the “middle-class squeeze”, where middle-income households face growing financial pressure from rising living costs alongside reduced state support.
On the proposed petrol subsidy rationalisation, he suggested alternative mechanisms such as a controlled fuel price float or limiting subsidised petrol purchases to a fixed quota, such as the first 100 litres per consumer.
Separately, Fellow of the National Professors’ Council Professor Dr Azmi Hassan proposed narrowing the definition of high-income households to the top 15 per cent instead of the current 20 per cent bracket, using data from the national Main Database (PADU) as a key reference point.
He said integrating PADU with Inland Revenue Board data could improve the accuracy of subsidy targeting and ensure assistance is directed more precisely to eligible groups.
Azmi rejected suggestions that such a move would be unfair, stressing that the proposal would only affect households with strong financial capacity.
Consumer advocates also highlighted concerns over the reliability of existing data systems used to determine eligibility for subsidies and assistance programmes.
Federation of Malaysian Consumers’ Associations chief executive officer Dr T Saravanan said inconsistencies in data relating to income levels, employment status, household dependents and changing economic conditions could lead to exclusion errors or misdirected assistance.
“If the data is inaccurate, there is a risk of exclusion or mistargeting. Before full implementation, the government must ensure that review, update and appeal processes are simple, efficient and accessible so consumers are not adversely affected by data weaknesses,” he said.
Saravanan added that any reduction in fuel subsidies for certain groups should be accompanied by compensatory measures such as tax relief or additional targeted assistance to mitigate financial impact.
He also stressed the importance of strengthening enforcement against fuel smuggling, reducing wastage in public spending and improving the efficiency of subsidy distribution systems.
Meanwhile, Deputy President of the Consumer-Friendly Organisation of Malaysia Azlin Othman said the proposed rationalisation of subsidies for high-income groups is a reasonable step towards ensuring fiscal sustainability and improving the targeting of government aid.
However, she said such reforms must be implemented gradually and with clear public communication to avoid misunderstanding, market uncertainty and negative sentiment.
Prime Minister Datuk Seri Anwar Ibrahim had previously stated that the government is still evaluating the most appropriate mechanism for petrol subsidy reform targeting high-income groups, with a final decision expected to be announced in due course. - May 13, 2026
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