KUALA LUMPUR, 26 June 2024: The Malaysian Tourism Federation (MTF) calls on the government to implement an immediate and substantial diesel subsidy mechanism for van and tour bus operators.
The recent diesel price increase has inflicted severe financial losses for both tour operators and travel agents who are already grappling with an extremely competitive business environment.
The issue was raised at the MTF Annual General Meeting held on 20 June.
“It is not just a simple matter of passing the extra cost charged by transportation owners to the tourists but to honour the contractual tour package arrangements and obligations that apply over the next six to nine months. The tourism business involves goodwill, and we have to bear in mind that some of these key source destinations are price sensitive, particularly in the Indian, ASEAN, and Chinese markets,” said MTF President Datuk Tan Kok Liang.
Calculating the Substantial Losses
“A typical diesel bus trip achieves an average fuel efficiency of 4 km per litre. Every time a bus makes a trip on pre-committed rates established before the price hike, it incurs a loss. This is unsustainable for our operators and threatens their very survival. Tourism businesses operate on thin profit margins,” commented Tan.
To highlight the severity of the situation, Tan explained: “Each month, tour operators are losing approximately MYR3,600 per bus, based on average consumption of 3,000 litres per month and an MYR1.20 per litre increase. As we understand, about 10,000 tourism vehicles will be on the road without targeted assistance for the next six months. Tourism operators stand to lose more than MYR100 million over this period.
“The tourism eco-system comprised of multiple service providers and intermediaries. Ultimately, the final contractual party may have to bear the brunt of the increase. For example, corporate incentive events hosted in Malaysia have been pre-planned a year in advance (with contracts signed). Recently, a tour company handling an international incentive of 10,000 persons for a six-day programme had to absorb additional costs of MYR300,000 as the bus operator rejected a compromise,” commented Tan.
Support for Micro, Small, and Medium Enterprises
The government must recognise that most tour operators are micro, small, and medium enterprises (SMEs). These businesses are already fighting for survival in a fiercely competitive market both regionally and globally. The additional financial burden from increased diesel costs is putting extra pressure on their companies, he explained.
Requests for Market Adjustment
In light of these dire consequences, MTF requests the following immediate action:
- Immediate Fuel Subsidies up to 31 March 2025: MTF requests a minimum allocation of 3,000 litres in a monthly diesel subsidy per unit vehicle up to 31 March 2025. Or…
2. Extension up to 31 March 2025 of the MYR2.15 per litre diesel subsidy: MTF requests that the government extend the MYR2.15 per litre diesel subsidy until 31 March, 2025.
The remedial action is critical to provide tour operators the necessary time to adjust to the new pricing structure, alleviate the crushing financial burden caught by the rising diesel cost and ensure the industry remains competitive.
Urgent Appeal to the Government
“Tour operators are the backbone of our tourism industry and vital to our economy,” Tan emphasised. “While we understand and support the objectives of the Madani government and the rationalisation of the diesel subsidy initiative, the industry requires immediate and decisive support from the public stakeholders to navigate this crisis.
“We urge the government, especially the Ministry of Finance, Ministry of Transportation and the Ministry of Tourism, Arts, and Culture (MOTAC), to act swiftly and consider the MTF’s urgent proposals.”
