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China to raise retail fuel taxes, scrap road fees

From Bloomberg| December 06 , 2008 13:10 BJT

China, the world's second-largest energy user, will increase retail fuel taxes and abolish some fixed charges for car owners next year to spur the use of more efficient vehicles and to meet energy-saving targets.

The government is seeking public advice for a plan to raise the consumption tax on gasoline to 1 yuan per liter from 0.2 yuan per liter, the National Development and Reform Commission said in a statement on its Web site today.

China is taking advantage of plunging oil prices to implement energy tax plans first proposed about 10 years ago. The country wants to curb fuel usage to reduce oil imports and to help cut pollution in major cities.

"It's a significant step forward in China's energy price reforms,'' said Qiu Xiaofeng, an analyst at China Merchants Securities Co. "This will boost the use of smaller cars and save energy."

The government will introduce a price cap for gasoline and diesel, according to the statement. China is accelerating plans to alter its fuel-pricing system to bring gasoline and diesel prices in line with crude costs, the government said Nov. 20.

The tax on diesel will be increased to 0.8 yuan per liter from 0.1 yuan per liter, the commission said. Existing road- maintenance fees and five other fixed charges will be abolished.

Oil hit a four-year low of $43.67 a barrel yesterday as the global recession cuts energy demand. That compares with a record of $147.27 in July.

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