Less populous states with limited revenue to benefit as capitation grants rise under new law

KUALA LUMPUR, March 11  — The Dewan Negara today passed the Capitation Grant Bill 2026, which seeks to amend the rates of grant allocated according to the population of each state based on a new rates structure.

Deputy Finance Minister Liew Chin Tong said the proposed increase in rates based on the population structure would provide optimal benefits to all states, including helping less populous states with limited state revenue, while also ensuring that the more populous states receive higher annual grant increase.

The rates for the first 100,000 persons, the next 500,000 persons, the next 500,000 persons and the remainder will be increased to RM102 per person (from RM72), RM14 per person (previously RM10.20), RM13.50 per person (previously RM10.80), and RM13 per person (previously RM11.40), respectively.

The bill was passed by a majority voice vote after being tabled by Liew for its second and third readings in the Dewan Negara after being debated by 15 senators.

“The decision to review the grant was a joint decision reached by the federal and state governments, with the participation of the menteris besar, chief ministers, and the Sarawak Premier.

“The review this grant or law every 10 years is based on the findings of the Department of Statistics Malaysia’s (DOSM) studies carried out every decade,” he said in the Dewan Negara today.

Capitation grants are federal funds provided to states based on population size. The last amendment to the grant rates was made 24 years ago, in 2002.

Liew said the proposed amendment will also increase the amount of operating grants to states on a per capita basis, particularly for less populous states.

“This allows these states to receive larger allocations for the number of people in the first tier group. However, all states will still receive annual increases in grants based on population projection data prepared by DOSM,” he explained.

Meanwhile, Liew also proposed that the senators establish a Dewan Negara committee to review the direction of federalism, understand current issues, and create an environment that encourages in-depth discussions on related matters.

The Act will come into force on April 1 and is expected to involve an additional expenditure of up to RM538 million.

The Dewan Negara sitting continues tomorrow. — Bernama