Malaysia has opted for a fuel price hike like many countries across the world, reducing government subsidy amidst warnings from opposition politicians and economists that the consequences would be adverse.

The price of petrol has been hiked by 78 Malaysian cents to 2.70 ringgits (83 US cents) per litre, while the price of diesel has been hiked by 1 ringgit to 2.58 ringgit per litre.

The hike in petrol price is 40 percent and in diesel 63 percent. The cooking gas price was left untouched, The Sun newspaper said, adding that the prices would be reviewed every month.

Prime Minister Abdullah Ahmad Badawi's government announced the new prices after several days of confabulations.

An offshoot of the fuel price hike, expected for some weeks, has been a campaign in Penang state that the government abandon the expensive monorail project and restore the tram system that was established during the British era.

Malaysia has given up using trams but the tracks remain and can be put to use again, says citizens' groups in Penang.

The movement stems from an increasingly popular notion that the monorail is far too costly and would adversely effect the heritage streets and green landscape of Penang.

The "Penangites for Tram" campaign coordinator Anil Netto explained that investment required for developing a tram network would be much lower than for constructing the monorail.

"The tram is a more substantial choice as we can revive the system based on already existing old tram lines that Penang used to have, thereby eliminating excessive additional costs," he said.