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Levying fuel tax will save energy
By Wei Ling (China Daily)
Updated: 2005-08-16 10:08

The equipment is in place. The receipts have already been printed. The policy was completed years ago.

Fuel tax reform is ready to be introduced, yet we are still waiting. For years the government has been biding its time, looking for "an appropriate time" to levy the tax.

Such a delay does not sit well with the nation's drive to build a resource-efficient society.

When the country's most influential TV stations are giving viewers tips on saving water and electricity, it is obvious we need better market tools, rather than slogans, to enforce energy efficiency.

Fuel tax is one of these tools. The popular practice in developed nations is widely regarded as the best way to curb oil consumption.

Under the reform scheme, consumers will buy petrol at tax-added prices, while the current road toll system requires drivers to pay a fixed road maintenance fee to transportation departments no matter how much fuel they consume.

With the imposition of a fuel tax, drivers will have to think again before turning the ignition key.

Manufacturers will also be encouraged to develop cars that are more fuel-efficient as petrol consumption will become a key index for buyers when selecting their new car.

A poll of more than 14,000 people conducted by sina.com showed that more than 90 per cent listed saving fuel as the most important consideration in car purchasing, considering the fuel tax is to be levied.

But this is not enough to elicit immediate action from the government, despite the fact that energy shortages are affecting economic growth and pumps are running dry in cities like Guangzhou.

Many explanations for the seven-year delay have been proposed. High oil prices is the most frequent. An official from the State Taxation Administration said just days ago the time is still not ripe in light of the rising oil prices on the international market, according to the Beijing News.

According to officials it would be more favourable if prices dropped to a relatively low level, which would mean consumers more readily accepted the reform, and therefore higher petrol price. It is for such an opportune moment that we have been waiting, and waiting.

When policy-makers began designing the reform scheme, oil prices on the international market stood at US$15 a barrel. But the price has since jumped to top US$60 - and some international consulting companies have predicted the price may rise to US$70 in coming years.

Will our hoped-for low oil price ever materialize? Possibly not. Great changes have taken place in the world oil market in recent years. Demand, especially from developing countries, has been surging. More and more people have accepted the reality that oil resources are limited and believe the world will suffer in the decades to come.

Last year, the world oil market recorded a 30 per cent price rise, which many traders believe signalled the start of the high oil price era.

In China, petrol prices have also been on the rise. The price for No 93 gasoline has risen from 2.3 yuan (28 US cents) per litre in 2000 to more than 4 yuan (49 US cents) today.

Cao Yushu, spokesman for the National Development and Reform Commission, admits China has entered an era of high oil prices. "Low oil prices won't come back in a certain period in the future," he said.

In these circumstances, how long should we wait? What if the oil price continues to rocket? If we worry that consumers will not accept the reform at the current price level, can we expect them to welcome it in a few years when it costs them even more?

Obviously, waiting is not the answer.

Perhaps oil is merely an excuse, allowing postponement. Insiders say an important factor behind the delay is the government's failure to find a way to balance the interests of different departments that will be affected by the reform programme.

Transportation departments have been the strongest opponents of the reform. If a fuel tax is introduced, hundreds of thousands of fee collectors will have to be resettled.

Transport authorities will have to wait for finance departments to allocate funding for road maintenance, rather than collecting it directly from drivers.

Distributing tax revenue between local and central governments is another challenge. Currently, a portion of the road maintenance fee is passed to local finance departments, while the fuel tax will go straight to central coffers.

Oil-consuming sectors that do not use roads will require compensation.

The National Development and Reform Commission must also consider the impact of the fuel tax on consumer prices. Higher oil prices may lead to a fresh round of price rises that may stir up public resentment.

We must be prudent and take every aspect into consideration when introducing such far-reaching reforms. But all of these problems, especially those concerning certain departments or certain groups of people, should be played down compared to national concerns. We have to take action, now.

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