DTI warns against double dipping of incentives

MANILA, Philippines – The Department of Trade and Industry (DTI) has warned against double dipping of incentives, arguing that when there is a guaranteed rate of return, investors are no longer entitled to income tax holidays (ITH).

In an interview with reporters, Trade and Industry Secretary Gregory L. Domingo said that for the feed-in tariff (FIT), if the investors already have subsidies then they can no longer avail of the ITH. “If there is already a guaranteed rate there will be no added incentives anymore. Otherwise there will be double dipping.”

While Domingo admitted that there were double dipping, especially in the power sector in the past, he said they have already corrected that last year and they no longer give ITH to those that have guaranteed rates.

When asked if the government can go after those that availed of double dipping, Domingo said it was already given and the new anti-double dipping policy covers future availments. He said it would be difficult to make it retroactive because the incentive has already been approved and given.

The Philippine Chamber of Commerce and Industry (PCCI) earlier said that the FIT is anti-poor and anti-business. The group expressed their support for renewable energy (RE) but said the FIT will inevitably increase power cost.

The FIT is a subsidy given to RE developers which the government is still determining for how much. Thus, the FIT refers to a guaranteed rate given to renewable energy developers for their output.

In an interview with reporters, PCCI president Francis Chua said the power cost in the Philippines is already three times the cost in China.

“Is there any transparency in the FIT,” said Chua. “It is anti-poor. The cost of incentives will be passed on to consumers.”

Chua said they will sit down with the fiscal managers to discuss the FIT issue because as businessmen the higher power cost will put them at a disadvantage especially against players in other nations with lower power costs.

Chua said that if the government would really like to help Filipinos, it would be better to put the money in the conditional cash transfer program.

According to Chua, Indonesia, Vietnam and Thailand have lower FIT rates compared to what is being talked about in the Philippines, which is three times higher than these countries.

Chua noted that the gap between RE and fossil fuel on the consumers’ electric bill would amount to 20 centavos per kilowatthour because for every 20 megawatt RE plant, the project proponent has to put up a one-megawatt fossil fuel-fed power plant as back up-power.

In its position paper, the PCCI has asked the agency to proceed with caution in crafting the rules on the Renewable Portfolio Standards (RPS) to ensure that the need to attract investments in RE sources and diversify the country’s energy mix will be balanced with the need to build a sustainable and reliable power supply and make electricity rates competitive. –Ma. Elisa P. Osorio (The Philippine Star)