Carriers seek fuel subsidy, suspension of excise tax, cut in gov’t fees

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Image by Gerd Altmann from Pixabay
  • Domestic shipping and air carriers want a reduction in government charges to help mitigate effects of rising fuel prices on their operations
  • A cut in fuel excise taxes and fuel subsidy is being pushed by domestic shipping firms
  • The Lower House fuel crisis ad hoc committee plans to ask President Rodrigo Duterte to call for a special session of Congress to deliberate on House Bill 10438, which will suspend fuel excise taxes

Domestic shipping and air carriers are seeking a reduction in government-imposed charges to help mitigate effects of rising fuel prices on their operations.

A fuel subsidy is being pushed by domestic shipping and land sector stakeholders. Land transport operators are eyeing a service contracting scheme and fare hike review.

The railway sector is also requesting a special budget allocation, Lower House Committee on Transportation chairperson Edgar Mary Sarmiento said during the fuel crisis ad hoc committee meeting on March 7.

The meeting, composed of the Committees on Transportation, Economic Affairs, Ways, and Means, and Energy, was called to tackle effects of rising fuel prices exacerbated by the Russia-Ukraine war, and solutions to cushion such effects.

Sarmiento in a presentation said jet aviation fuel has increased 72.78% to P38.60 per liter on March 6, 2022 from only P22.34 per liter on March 6, 2021.

For the same period, gas prices jumped 31.26% to P68.10 per liter from P51.88 per liter; diesel up 44.10% to P58.65 per liter from P40.70 per liter; and kerosene 34.18% higher at P64.07 per liter from P47.75 per liter.

Aviation passenger fuel surcharge

As a result, passenger fuel surcharge grew to P108-P411 in March 2022 from P45-P171 in March 2020 and March 2019 for domestic flights, according to the Civil Aeronautics Board (CAB).

Passenger fuel surcharge for international flights rose to P543 to P5,026 in March 2022 from P218 to P2,076 in March 2020 and March 2019.

READ: Expect higher PH airfares with fuel surcharge hike

Air Carriers Association of the Philippines (ACAP) chairman Bonifacio Sam, during the meeting, said they support the request for reduction of or non-increase on government-imposed fees and charges. Bonifacio said Mean of Platts Singapore (the average of a set of Singapore-based oil product price assessments published by Platts) oil prices have been increasing since December last year from $79 per barrel to $124 per barrel as of March 4.

He noted that in 2018, the CAB, in consultation with the aviation industry, developed a formula to determine the fuel surcharge that airlines may impose to cushion impact of rising fuel prices.

The formula is encapsulated in CAB Policy Resolution No. 44 and later amended by Policy Resolution No. 64 in 2019 and Policy Resolution No. 46 in 2021.

While Sam said the association is glad such a mechanism is in place, he emphasized its adoption is still left to the discretion of individual airlines.

He said the aviation industry will continue to monitor the situation and “exercise fiscal discipline and tap effective revenue generating measures amid this current situation, including the implementation of cost mitigating strategies.”

Airport operators Manila International Airport Authority, Clark International Airport Corp., and Mactan-Cebu International Airport Authority were ordered to submit their comment on the request of ACAP.

Maritime sector

During the same meeting, Philippine Inter-island Shipping Association (PISA) executive director Atty. Pedro Aguilar said they join other members of the transport sector in requesting for fuel subsidy or the suspension of the excise tax.

He noted fuel accounts for 40-50% of a ship’s operating cost, depending on the consumption and type of fuel used.

Domestic shipping lines have already imposed fuel surcharges to recover from increasing fuel prices.

READ: Costlier crude forces local carriers to impose fuel surcharge

Considering a fuel subsidy or cut in excise taxes entail legislative or executive actions and may take long to process, Aguilar said another measure could be the substantial reduction of fees and charges imposed by regulating agencies such as the Philippine Ports Authority’s (PPA) port charges.

READ: Domestic shipping group seeks House probe on higher PPA tariffs

PPA Commercial Services Department acting manager Leila Martinez said they will cascade PISA concerns on port charges to the PPA management.

Government measures

Maritime Industry Authority (MARINA) Legal Service director Atty. Maximo Bañares said the maritime authority has already provided a 30% discount on the annual tonnage fee for 2021 to assist the domestic shipping sector, which has been hard hit by the COVID-19 pandemic.

READ: MARINA extends 30% discount on 2021 tonnage fee

Department of Energy (DOE) undersecretary Gerardo Erquiza assured the country has enough fuel supply amid the Russia-Ukraine conflict.

In the meantime, Erquiza said DOE is coordinating with oil companies for fuel discount promos to the public transport sector. He said oil companies have already agreed to a P1-P4 discount, with the announcement posted on the DOE website.

The Land Transportation Franchising and Regulatory Board is also implementing the P2.5-billion Pantawid Pasada Program to provide fuel subsidy to land transport operators, while the Department of Agriculture has a P500-million budget for a fuel discount program for farmers and fisherfolk.

Deregulation law amendment

Over the long term, DOE proposes amendment of the Oil Deregulation Law, including price unbundling, inclusion of minimum inventory requirements, and provision of intervention powers to the government during periods of price spikes and prolonged increases in the prices of oil products.

Other long-term recommendations include suspension of the excise tax on fuel; establishing the strategic petroleum reserve infrastructure; ensuring minimum inventory requirements; and strong campaign energy efficiency and conservation.

In a press briefing after the meeting, the fuel crisis ad hoc committee said they plan to ask President Rodrigo Duterte to call a special session so Congress may proceed with passage of House Bill 10438, which will suspend excise taxes on fuel.

Committee on Ways and Means chairperson and Albay 2nd district representative Joey Salceda said the government is expected to collect around P77 billion in additional value-added tax revenues in 2022 from the implementation of the Tax Reform for Acceleration and Inclusion Law. He said this can be mobilized as relief for the rest of the year.

Committee on Economic Affairs chairperson and AAMBIS-OWA party list representative Sharon Garin added that if the Lower House convenes in a special session, they would also review Republic Act 8479 or the Downstream Oil Industry Deregulation Act of 1998, particularly its provision on unbundling of oil prices and inclusion of the minimum inventory requirements provision.

Garin said the Lower House is awaiting the schedule for the special session, but Salceda hopes Duterte will call for it by mid-March 2022, stressing the urgency of the matter.

Salceda noted the President could also declare a state of economic emergency brought about by the fuel crisis, enabling him and local government units to utilize the government’s calamity fund as added financial support for the affected sectors. – Roumina Pablo