EO on oil tariff cuts out by May 15
Manila Bulletin
May 7, 2006
To avert any impending fare hike, the Department of Energy (DoE) is pushing that an Executive Order (EO) mandating reduction in import tariffs of crude and finished petroleum products to 1.0 percent from prevailing 3.0 percent be issued on or before May 15 this year.
Estimates have noted that this will ease impending price hikes by at least P0.50 per liter; thus, giving the government leverage to ask the transport sector’s consideration to defer any bid for a fare adjustment.
DoE director for oil industry management bureau Zenaida Y. Monsada noted that indications are positive for the EO’s issuance before the May 15 resumption of Congress’ session; as there were not much objections raised during a public hearing convened yesterday by the Tariff and Related Matters Committee on the proposed tariff cuts.
"They set May 5 as deadline for the submission of position papers…so, most likely EO will be issued before Congress session resumes," the energy official has stressed.
There are no mechanics and specific threshold levels set through for this policy proposal. The details are yet to be hammered out with the Departments of Finance, Energy and the National Economic and Development Authority.
"We just want to maximize benefits for public transport…but it should be implemented immediately so a fare hike can be avoided," Monsada added.
It would be noted that both during the reigns of former Energy Secretaries Mario V. Tiaoqui and Vincent S. Perez, the import duty reductions were also employed to cushion spikes of oil prices on the consumers.
The economic managers of the Arroyo administration have again seen this as a more viable option than the more sweeping propositions of other sectors to scrap the value added tax (VAT) charges on petroleum products; noting that such will reverse any modest economic gains already achieved by the country since the implementation of Expanded VAT Law last year.
And as the new string of price up-ticks are again disturbing government, consumers and the oil industry, activist groups are again turning to calls for the scrapping of the Oil Deregulation Law, the policy that mandated the inception of competitive forces in the oil market.
Energy secretary Raphael P.M. Lotilla, however, clarified that "the series of petroleum price increases in the domestic market is not caused by the implementation of the Oil Deregulation Law; but of distressing factors in the world market which is way beyond the control of the Philippines, an economy very much dependent on oil imports.
He added that local pump prices should have even been higher "if we are in a regulated environment under which the oil companies are assured of a return on their investments and a reasonable rate of return on rate base."
Based on DoE’s computations, it was indicated that with the prevailing prices at P34.24 per liter of diesel, prices would have been P40.91 per liter if the industry is still regulated; while gasoline prices would have been P45.05 per liter compared to only P38.24 per liter in the current deregulated set up.
"Going back to price regulation if only to halt the effect of the international prices in the domestic market would entail additional government resources and this is not fair because it will effectively displace national funds for other equally important projects," he cautioned.
The energy chief stressed that the Oil Price Stabilization Fund (OPSF) imposed during the regulated regime to absorb increases in world oil prices and to minimize frequent domestic price adjustments is no longer applicable and should not even be considered.(MMV)
May 7, 2006
To avert any impending fare hike, the Department of Energy (DoE) is pushing that an Executive Order (EO) mandating reduction in import tariffs of crude and finished petroleum products to 1.0 percent from prevailing 3.0 percent be issued on or before May 15 this year.
Estimates have noted that this will ease impending price hikes by at least P0.50 per liter; thus, giving the government leverage to ask the transport sector’s consideration to defer any bid for a fare adjustment.
DoE director for oil industry management bureau Zenaida Y. Monsada noted that indications are positive for the EO’s issuance before the May 15 resumption of Congress’ session; as there were not much objections raised during a public hearing convened yesterday by the Tariff and Related Matters Committee on the proposed tariff cuts.
"They set May 5 as deadline for the submission of position papers…so, most likely EO will be issued before Congress session resumes," the energy official has stressed.
There are no mechanics and specific threshold levels set through for this policy proposal. The details are yet to be hammered out with the Departments of Finance, Energy and the National Economic and Development Authority.
"We just want to maximize benefits for public transport…but it should be implemented immediately so a fare hike can be avoided," Monsada added.
It would be noted that both during the reigns of former Energy Secretaries Mario V. Tiaoqui and Vincent S. Perez, the import duty reductions were also employed to cushion spikes of oil prices on the consumers.
The economic managers of the Arroyo administration have again seen this as a more viable option than the more sweeping propositions of other sectors to scrap the value added tax (VAT) charges on petroleum products; noting that such will reverse any modest economic gains already achieved by the country since the implementation of Expanded VAT Law last year.
And as the new string of price up-ticks are again disturbing government, consumers and the oil industry, activist groups are again turning to calls for the scrapping of the Oil Deregulation Law, the policy that mandated the inception of competitive forces in the oil market.
Energy secretary Raphael P.M. Lotilla, however, clarified that "the series of petroleum price increases in the domestic market is not caused by the implementation of the Oil Deregulation Law; but of distressing factors in the world market which is way beyond the control of the Philippines, an economy very much dependent on oil imports.
He added that local pump prices should have even been higher "if we are in a regulated environment under which the oil companies are assured of a return on their investments and a reasonable rate of return on rate base."
Based on DoE’s computations, it was indicated that with the prevailing prices at P34.24 per liter of diesel, prices would have been P40.91 per liter if the industry is still regulated; while gasoline prices would have been P45.05 per liter compared to only P38.24 per liter in the current deregulated set up.
"Going back to price regulation if only to halt the effect of the international prices in the domestic market would entail additional government resources and this is not fair because it will effectively displace national funds for other equally important projects," he cautioned.
The energy chief stressed that the Oil Price Stabilization Fund (OPSF) imposed during the regulated regime to absorb increases in world oil prices and to minimize frequent domestic price adjustments is no longer applicable and should not even be considered.(MMV)
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