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LC: resolution to extend the concessionary duty rate for ULSD

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Following is the speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in moving the resolution to extend the concessionary duty rate for

ultra-low sulphur diesel in the Legislative Council today (March 19):

Madam President,

I move that the second motion under my name, as printed on the Agenda, be passed to extend the existing concessionary duty rate on ultra low sulphur diesel (ULSD) of $1.11 per litre for another year, that is, from April 1, 2003 to March 31, 2004.

In view of the recent increases in oil prices and the operating difficulties of the transportation industry, the Financial Secretary announced in his Budget Speech on March 5 that the Government had proposed to extend the duty concession for ULSD for another year. The resolution moved by me today is to implement the Financial Secretary's proposal.

In the past four years or so, the Government has provided a series of concessions for motor diesel or ULSD. In June 1998, we reduced the duty rate on regular diesel from $2.89 to $2 per litre as a temporary measure in the light of the economic climate at that time. Later, in July 2000, ULSD was introduced at a concessionary rate of $1.11 per litre on environmental grounds. The duty rate was to be adjusted to $2 per litre on 1 January 2001 and was to revert to $2.89 per litre on 1 January 2002. In order to relieve the operating pressure on the transportation industry, the Government, however, proposed to the Legislative Council in December 2000, June 2001 and March 2002 to postpone the reversion of the duty rate on each occasion. According to the latest approved resolution, the duty rate is scheduled to revert to $2.89 per litre on April 1, 2003. The above relief measures have so far cost government revenue a total of $4.6 billion.

As regular motor diesel has been completely replaced by ULSD at petrol filling stations in the territory, it is not necessary for us to consider encouraging the use of ULSD by maintaining the concessionary duty rate from the environmental point of view. The Government's current proposal is a special measure to relieve the operating difficulties of the transportation industry in the light of the current movements in oil prices. We propose that the duty concession for ULSD ceases on the expiry of the latest concessionary period on 31 March 2004, when the duty rate will revert to $2.89 per litre. This special concession will cost $1 billion in 2003-04.

Madam President, I hope Members will support the resolution.

End/Wednesday, March 19, 2003

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