Belmonte opposes repeal of Oil Deregulation Law

Published by rudy Date posted on April 28, 2011

MANILA, Philippines –  Speaker Feliciano Belmonte Jr. yesterday expressed opposition to proposals for the repeal of the Oil Deregulation Law.

“I think we went through a long process of finally deregulating the industry, and that was the right move. Scrapping it or changing it from deregulation to regulation is something that requires a lot of talks. My own personal view is I am not in favor of it,” he said.

He said the recent surge in pump prices was caused by the political turmoil in oil-producing nations.

“The fundamentals (of a deregulated environment) are still there, and it just so happened that you have all these things happening in oil producing countries,” he said.

“We had something like this in the past, and they were not permanent situations,” he added.

Belmonte, however, conceded that the government has to take measures to ease the burden of high oil prices on the people.

He said the House of Representatives would support measures implemented by the administration to address the skyrocketing cost of fuel, which causes a corresponding rise in prices of basic commodities. There were proposals from several lawmakers and transport groups to repeal the Oil Deregulation Law and to impose price controls on petroleum products.

President Aquino also opposes such proposals. Economists said regulating the industry once again would be a step backward for the economy.

The administration has launched a month-long fuel subsidy program for certain transport groups to blunt the effects of the successive increases in fuel prices on the transport sector. It is also being determined if the subsidy would be extended to farmers and fisherfolk. Among the solutions being considered to bring down fuel prices in the country is to suspend or reduce the 12-percent value-added tax (VAT) levied on petroleum products.

Energy Secretary Jose Rene Almendras had admonished oil firms after it was discovered that they have unduly overpriced their petroleum products by an average of 40 centavos per liter.

The admonition resulted in a price rollback the day after the statement was made. Almedras had said the government is having difficulty finding a balance between policy direction, maintaining investor confidence in the country, and satisfying public demand for lower prices.

He said that while prices of petroleum have risen steadily in the past months, fuel supply in the country has been stable.

Public transport group Pagkakaisa ng Samahan ng mga Tsuper at Opereytor Nationwide (Piston), however, said Almedras’ statement was “misleading.” “It is a misleading statement and is an insult to motorists and the public that is suffering from the heavy burden brought by the rising prices of goods and services,” said Piston secretary-general George San Mateo.

Long-term solutions

Steven Cua, president of the Supermarkets Association of the Philippines, said government leaders must have the political will to be able to come up with a sustainable solution to surging oil prices.

“It’s always politics. But it should be economics. We should focus more on productivity,” he said.

Antonio Tiu, chairman and CEO of private firm AgriNurture, said people engaged in agriculture do not need fuel subsidy. Instead, the government has to get rid of corruption plaguing the sector.

He said farmers only get only 47 percent of the selling price of produce while the rest of the proceeds go to people he described as “powerful.”

Sen. Juan Miguel Zubiri, chairman of the Senate committee on environment and natural resources, said the administration should put up additional pumping stations in areas where fuel prices are higher.

He also urged President Aquino to remove customs duties and taxes on the importation of electric cars – which are now being mass-produced in Japan and the US – to make these green cars more affordable.

“These electric cars and jeepneys utilize zero amount of fossil fuel. These will help clean the air of Metro Manila as they have zero emission,” Zubiri said.

The Philippine Independent Power Producers Association (PIPPA) urged the government to review the imposition of VAT on power.

The group noted that the government charges power utilities a 12-percent VAT on top of a 32-percent corporate income tax, and a local franchise tax imposed on their gross receipts which they, in turn, pass on as additional charges to consumers. In contrast, most of the country’s peers in the region subsidize their power sector, resulting in cheaper electricity rates.

PIPPA president Ernesto Pantangco said they also support bills in the Senate that aim to lower the cost of electricity by removing or reducing the royalties being imposed on indigenous sources of energy, particularly natural gas.

Earlier estimates showed that if the government will remove the P1.46 per kilowatt-hour (kWh) royalties from the Malampaya gas project, electricity rates would be immediately reduced. It was argued that power costs continue to be very high in the Philippines because indigenous fuels like natural gas are “the most heavily taxed.” It was noted the if the P1.46 per kWh royalties were removed, this would result to a 38 percent reduction in the electricity bill of industries. The impact of the removal of royalties on residential consumers, specifically customers of Manila Electric Co. (Meralco), will be a rate reduction of 50 centavos per kWh. – With Ranier Allan Ronda, Christina Mendez, Sandy Araneta, Donnabelle Gatdula –Jess Diaz (The Philippine Star)

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