China mulling fuel tax to replace road tolls

Shanghai, November 21 (Gasgoo.com) China's top economic planning body is working closely with other organizations to study the feasibility of reforming the oil pricing mechanism and introducing fuel taxes to replace road tolls and cut oil prices, state media said today, citing latest information from the planner.

China's National Development and Reform Commission (NDRC) yesterday said on its website that it had held a meeting to discuss the fuel pricing reform with officials from the finance ministry, transportation authorities and local governments. The topics included lowering refined oil prices, levying fuel taxes, abolishing road and waterway maintenance fees, and removing tolls stations on lower-grade highways.

However, the NDRC did not say if any specific decisions have been made, or specify when to launch the long-awaited reform. State media reported earlier that China will soon carry out its plans to impose the fuel tax as early as next month. The government has been waiting for nearly a decade to move ahead with the much debated tax.

The introduction of a fuel tax in China was first proposed in 1994 but has been delayed amid concerns that it would impose too great a burden on those who consumed more oil. The government has instead collected road maintenance fees from automobile users regardless of how much gasoline or diesel oil they use.

Analysts said the on-going oil price drop presented a good opportunity for China to resume its fuel tax reform. World crude oil prices have fallen below $55, down more than 60% from the peak price of $147 in mid-July.

Zheng Jun, an analyst with China Securities, said he had long believed that the government is likely to set the fuel tax at 30%, lower retail gasoline prices by 20% and abolish road maintenance fees.

Still, the government is not expected to scrap road tolls on highways, "as that would seriously dampen investment enthusiasm," Zheng explained.