Implementation of Budget concessions for ultra low sulphur diesel and electric vehicles

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The Legislative Council passed two resolutions today (March 19) to implement two concessions proposed in the 2003-04 Budget.

The Financial Secretary announced in his Budget Speech on March 5 that he proposed to extend the concessionary duty rate on Ultra Low Sulphur Diesel (ULSD) for another year. The proposal has taken into account the operating difficulties of the transportation industry in the light of the current movements in oil prices.

When ULSD was first introduced in July 2000, duty thereon was set at a relatively low $1.11 per litre for environmental reasons in order to facilitate a switch from regular diesel to this less-polluting fuel. Since then, the diesel-fuelled vehicular fleet in Hong Kong has completely switched from regular diesel to ULSD.

"According to previous resolutions passed by the Legislative Council, the duty on ULSD was to be adjusted to $2 per litre on January 1, 2001 and to $2.89 per litre on January 1, 2002. However, on three occasions in end-2000, June 2001 and March 2002, the Administration, with the Legislative Council's agreement, extended the concessionary duty rate of $1.11 per litre, as a measure to provide temporary economic relief for the transportation industry," a Government spokesman said.

With the passage of the resolution on ULSD under the Dutiable Commodities Ordinance (Cap. 109) today, the duty on ULSD will remain at $1.11 per litre up to March 31, 2004. The duty will revert to $2.89 per litre on the expiry of the concession, i.e. on April 1, 2004. This concession will cost government revenue $1 billion in 2003-04. The cumulative cost of ULSD concessions will amount to $5.6 billion.

The Financial Secretary also proposed in his Budget Speech to extend the exemptions from FRT for electric vehicles for a further three years in order to continue promoting the use of these environmentally-friendly vehicles. The resolution under the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330) passed today will extend the exemption until March 31, 2006.

The Government first granted the exemption for electric vehicles from FRT in 1994-95 and extended it on two occasions in 1997-98 and 2000-01 with the Legislative Council's agreement.

End/Wednesday, March 19, 2003

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