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Motorists may end up paying less for fuel

By Si Tingting (China Daily)
Updated: 2008-12-10 07:48

Car owners could pay less for gas after the government adjusts the retail fuel tax from Jan 1.

The retail gas price may drop rather than increase after the fuel price reform is implemented, said Xu Kunlin, deputy head of the pricing department of the National Development and Reform Commission (NDRC).

"We made it clear while devising the reform scheme that people would not have to pay more at the pump even if a higher retail fuel consumption tax was introduced," Xu said.

But he did not say from when exactly would fuel become cheaper and by how much.

Farmers who use gas to run tractors and water pumps are expected to be compensated with more subsidies.

Till Monday, a lot of car owners feared that they would have to pay more for gas after the reform, with many of them complaining that public opinion was being ignored in the reform scheme.

Last week, 1,773 car owners reportedly wrote a letter to the NDRC, the country's top planning body, urging it to lower fuel prices before levying a higher fuel tax.

The government issued a draft plan on Friday to raise the consumption tax on retail gasoline from 0.2 yuan to 1 yuan, and diesel from 0.1 yuan to 0.8 yuan from Jan 1. But it has decided to abolish six categories of highway tolls and waterways maintenance and administration fees, and is soliciting public opinion on the draft plan.

Fuel prices will be adjusted according to international oil prices after the fuel tax reform is implemented, Xu said.

Fuel prices in the country are based on $83.5 a barrel of crude. But crude price in the international market has fallen drastically in the past few months.

Though it was above $43 a barrel on Tuesday, it slid to a four-year low of $40 a barrel on the New York Mercantile Exchange on Friday, down nearly 73 percent from the record high of $147.27 on July 11.

The reform scheme will cut fuel costs and help stimulate the economy, analysts say.

"The government has hastened the pace of retail oil pricing reform because its top priority is to maintain economic growth and encourage people to buy more cars," said Zheng Jun, an auto industry analyst with China Securities Co.

"Since people will feel unhappy paying more for fuel in these difficult times the government has to lower the retail price by 35 to 40 percent to reflect the 70-percent fall in international crude prices from July."

The government also expects higher fuel tax to encourage people to buy energy-efficient cars, he said.