China announced its decision to lift the prices of processed oil
as of March 26 while setting up a mechanism to offer some subsidies
to disadvantaged communities and public service sectors.
In a circular made public Sunday, the?National Development and Reform
Commission, which regulates energy prices, said the producer
prices of gasoline will be raised by 300 yuan (US$37.5) per ton
while that of diesel oil will be up by 200 yuan (US$24.9) per
ton.
To offset the impact of the price hikes to communities sensitive
to higher prices, the commission said China's State Council has
decided to launch a mechanism to subsidize some of the communities
and public service sectors.
The recipients of the subsidies include grain growers, fishermen
and fishing firms operating and farming offshore or in inland
areas, using oil-driven fishing boats, state-owned forestry
enterprises and nurseries of forestry centers, urban public
transportation firms, said the commission.
It said the government will pay the unspecified amount of
subsidies directly to grain growers to mitigate the impact of the
price hikes of diesel oil and chemical fertilizers and other
agricultural production materials.
For operators of rural passenger shipping business, the
commission said the government will reduce the impact mainly
through such measures as adjusting the charges of transportation,
and offer proper amount of subsidies to those in difficulty.
The commission said local governments will offset the increased
financial burden on taxi drivers in the urban areas mainly through
readjusting the charges of transportation and imposing surcharge on
fuel oil.
It said local governments may offer provisional subsidies to
taxi drivers in the urban areas if they are unable to readjust the
charges in the immediate future.
The Chinese Government has ordered various localities and
government departments to implement the measures on subsides while
price regulators at various levels should improve inspection and
supervision of prices of processed oil to maintain the stability of
the oil prices.
Energy sector is one of the very few areas that Chinese
Government has yet liberalize price control since China began to
build a market economy.
The commission said China's current prices of processed oil are
far below that on the international market, which is not helpful to
oil refineries in China, to ensuring adequate supplies and to
improving energy efficiencies, thus having negative impact on the
stable operation of the economy.
Prior to the price hikes, the retail prices of domestically
processed oil is about US$43, while that of crude oil on the
international market stands at around US$60, an official with the
commission said in an interview with the press.
The artificially lower prices have resulted in heavy losses of
domestic refineries and made it difficult for the oil sector to
ensure domestic supplies.
The central government has been slow in raising processed oil
prices in the past two years to reduce the impact of higher oil
prices on the disadvantaged communities and public service sectors,
said the official.
The official said imported oil accounts for over 40 percent of
the country's oil consumption, and changing oil prices on the
international market are having growing impact on domestic oil
market and prices.
(Xinhua News Agency March 26, 2006)