PUTRAJAYA: A proposal for a centralised government agency to handle distribution of price-controlled essential foods will be tabled before the cabinet in about two weeks.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said the cabinet had agreed that there were weaknesses in the current distribution system, which has led to shortages of certain items in rural areas.

Subsidised items like the local 15 per cent broken rice, general purpose flour and cooking oil, are the common items which are often in short supply in rural shops.

Shahrir said this was partly due to demand pressure from larger retailers like hypermarkets in urban areas.

"In the cabinet and at ministry level, we all agree that the distribution system is not efficient in bringing subsidised items to rural areas. Improving distribution is part of our efforts to reduce the inflationary pressure on the people," Shahrir said at a press conference yesterday, after announcing the Consumer Price Index (CPI) for June.



He said he had received complaints and witnessed on his visits to rural areas the lack of subsidised items in rural shops. "They are hard to obtain and when there is supply, it finishes quickly."

Shahrir said the ministry had received offers from the Malacca state government and the Majlis Amanah Rakyat (Mara) to participate in the proposed distribution agency.

"This effort will need to be supported by the Federal Government and government agencies with networks in rural areas," he said, adding that the proposal was being fine-tuned.

The CPI for June was up by 7.7 per cent, from June last year, and 3.9 per cent higher than in May, driven by the fuel price increase implemented last month.

Shahrir said the figure was the highest since April 1981, when the CPI then was 10.8 per cent.

He said the CPI was expected to increase further for July, although "not drastically", because of the new electricity tariffs which took effect this month.

The food and non-alcoholic beverages group and the transportation group are the heaviest contributors to the CPI basket.

On world oil prices which were now below US$130 per barrel and its impact on local pump prices, Shahrir said it did not differ much from the price fixed by the government on June 4 (RM2.70 per litre of petrol) as the global price then was around US$125 (RM406).