Malaysia's BUDI Diesel Reform Ties Subsidies to Actual Users, Not Vehicle Owners

Prime Minister Anwar Ibrahim announced a shift in how Malaysia's BUDI Diesel subsidy works, one that moves the benefit away from whoever owns a vehicle on paper and toward whoever actually drives it. The change, unveiled on September 16, addresses a practical problem that had been flagged by diesel users, particularly those in Sabah and Sarawak, where the gap between formal ownership and real-world use has long created friction in subsidy distribution.

The old system tied subsidy eligibility strictly to a vehicle's registered owner. If that owner wanted someone else to benefit from the fuel discount, they could only transfer it to immediate family—a spouse, parent, child, or sibling. This worked in urban settings where vehicle ownership typically matched vehicle use. But in rural and interior regions of Sabah and Sarawak, the reality looked different. Pickups and jeeps moved through the landscape under informal arrangements: someone might continue paying another person's hire-purchase instalments without the title ever changing hands, a practice known locally as "sambung bayar." Others operated vehicles financed by companies, or worked in agriculture and rural transport where the person holding the registration was rarely the person behind the wheel. In these areas, public transport barely existed. Settlements scattered across vast distances, and a vehicle was often the only practical way to reach markets, obtain necessities, or move goods and people.

Under the new rule, a registered owner can now transfer subsidy eligibility to the actual user of a private diesel vehicle, provided that person is a Malaysian citizen with a valid MyKad and meets BUDI95 criteria. The transfer does not change who owns the vehicle—only who gets to claim the fuel subsidy. Each approved recipient receives a personal monthly quota tied to their identity card: 300 litres per month for standard diesel vehicles, or up to 400 litres for pickups and jeeps that qualify for an additional 100-litre allowance. That quota can be used for subsidised diesel, subsidised RON95 petrol, or a combination of both, depending on the recipient's eligibility.

Economist Lai Wei Sieng framed the change as a correction to a targeting problem. The old system risked leaving genuine users out of the subsidy simply because vehicle ownership records did not reflect who actually used the vehicle. "Transferring eligibility to the actual user can reduce the mismatch between vehicle ownership records and actual use," Lai said. The economist noted that the move reduces what policy analysts call "exclusion error"—the risk that people who should qualify are denied benefits because of a bureaucratic misalignment. At the same time, the government has built in safeguards. Transfers must go through formal application and are subject to cross-checks against other agency records before approval. A registered owner with multiple eligible diesel vehicles can transfer eligibility for up to three of them, but each vehicle's quota can only be transferred once, and each recipient can receive a transfer from only one owner. These restrictions exist to prevent subsidy leakage—the practice of quota rental or resale that has plagued fuel subsidy programs elsewhere.

Applications can be submitted through the BUDI Madani portal using MyDigital ID, or in person at any Inland Revenue Board office. For the eligibility to take effect on the first day of the following month, applications must be submitted by the 27th of the current month. All applications undergo data verification before approval.

Lai described the reform as evidence of the government's effort to improve targeted subsidies based on feedback from communities on the ground. The change keeps the subsidy controlled and directed—it does not revert to blanket access to cheap diesel for all buyers—while ensuring assistance reaches the people who actually need it. The economist also noted a secondary benefit: the government can now collect more accurate data on actual diesel consumption patterns, especially in Sabah and Sarawak. That information could help policymakers channel assistance more precisely to those who truly depend on it, while reducing the waste that has historically plagued fuel subsidy programs.