Beijing poised to unveil revision of fuel pricing

PUBLISHED : Friday, 05 December, 2008, 12:00am
UPDATED : Friday, 05 December, 2008, 12:00am

Beijing is expected to unveil proposed reforms to the domestic fuel pricing system as well as levies on motorists within a few days, and introduce a long-awaited fuel tax designed to replace road maintenance charges as soon as January 1, sources said.

The reforms are aimed at inducing energy conservation and enhancing industry efficiency through more market-based pricing, they added.

'Details of the proposed reforms should be released for public consultation in a matter of days and implementation is expected at the start of next year,' said an insider who attended an industry consultation session organised by regulator the National Development and Reform Commission.

The proposed fuel tax will be levied at about 30 per cent and will be collected by oil refiners, he said.

Zhang Xiaoqiang, a vice-director of the NDRC, was quoted by Bloomberg as saying on the sidelines of the Strategic Economic Dialogue forum in Beijing that he 'personally' believed January 1 was a 'good time' to introduce the fuel tax.

The impact of the fuel tax is expected to be offset by a concurrent cut in retail fuel prices, which are more than 50 per cent above levels in the United States since Beijing allowed refiners to make up for earlier refining losses by holding off price cuts, despite a 70 per cent fall in international crude oil prices since July.

A reform in the domestic retail fuel price-setting mechanism is also on the cards and the Shanghai Securities News last Friday quoted unnamed industry sources as saying Beijing planned to almost fully link domestic prices with international ones when crude oil prices fetch less than US$80 a barrel.

At crude prices of between US$80 and US$130, refiners will be allowed an unspecified profit margin, while price-setting will be left to the government at prices beyond US$130.

To prevent price shocks, a caveat to the new system is that price adjustments must not exceed 800 yuan per tonne within a month and 1,600 yuan per tonne in three months.

Existing domestic fuel retail prices are state-controlled, although Beijing has repeatedly said it wants to liberalise them.

Pricing reforms

To be collected by refiners, the planned tax on fuel is expected to be about: 30%