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Following is a question by the Hon Cheung Hok-ming and a written reply by the Secretary for Financial Services and the Treasury, Professor K C Chan, in the Legislative Council today (November 14):
Question:
Recently, I have received complaints from members of the public, who have expressed their dissatisfaction with several oil companies in Hong Kong, which are "quick-in-raising and slow-in-reducing" when adjusting fuel prices, as well as the high fuel duty in Hong Kong. In this connection, will the Government inform this Council:
(a) whether it has explored improvement measures to address the above problem of adjusting fuel prices by oil companies; if it has, of the details of the improvement measures; if not, the reasons for that;
(b) in view of the Government's strong financial position at present, whether it has considered lowering fuel duty to bring down fuel prices in Hong Kong so as to alleviate the burden of the public; if not, of the reasons for that; and
(c) given that one of the purposes for the Government to maintain high fuel duty is to curb the increase in vehicles, whether the Government has reviewed if such practice can achieve the anticipated effect; if it has, of the details of the effect; if not, whether it will review if it is necessary to continue such practice or resort to alternative measures?
Reply:
Madam President,
(a) This part of the question falls within the ambit of the Environment Bureau (ENB). ENB points out that the retail prices of vehicular fuel in Hong Kong are determined by oil companies, having regard to international oil prices, commercial practices and their operating costs. The Government appreciates the impact of vehicular fuel prices on the local economy, and has been monitoring closely trends in international oil prices and the retail prices of local vehicular fuel. International oil prices have been very volatile in recent months. The prices of Brent Crude oil and the Singapore free-on-board prices for unleaded petrol and diesel have been increasing markedly, reaching new record high levels. ENB has noted that changes in local pump prices of vehicular fuel have broadly been in line with trend movements of international oil prices. ENB has all along maintained the contact with the oil companies and urged them to reduce their prices whenever there is room for downward adjustment.
In a free market economy, the Government does not have the power to dictate the retail prices of vehicular fuel. But the Government will endeavour to ensure a stable fuel supply, and enhance competition by maintaining market openness and removing entry barriers. The Government has decided to introduce a new competition law and establish a Competition Commission. The Commerce and Economic Development Bureau has started working on the drafting of an appropriate legislation, which will apply to all sectors.
(b) Comparing with the relevant figures in other developed jurisdictions, the share of Hong Kong's duty in the retail price of vehicular fuel is not particularly high. The duty incidence of petrol is about 40%, which is lower than that in some developed jurisdictions, such as Japan, Germany and the U.K. As a result of the concessionary duty rate for ultra low sulphur diesel, duty represents only about 10% of the retail price of diesel, which is far lower than the case in the abovementioned jurisdictions.
The Government takes into account various factors in formulating duty rates for vehicular fuel, including the Government's financial position, the public's affordability and the impact on transport and environment. The Government reviews the duty rates for vehicular fuel from time to time, and would consider adjustments or concessions having regard to different circumstances and policies. For example, the Government has repeatedly extended the concessionary duty rate for ultra low sulphur diesel to alleviate the operating difficulties of the transport trade. Besides, the Government will soon propose new concessionary duty rate for Euro V diesel for Legislative Council's endorsement with a view to encouraging the market to switch to this more environment friendly fuel.
Petrol is used by private cars. As it is generally accepted that private cars are not a necessity in Hong Kong, we tend to be more prudent in considering any proposals to reduce the duty rate for petrol.
(c) The increase of vehicles in Hong Kong is affected by various factors, including economic and population growth, and motor vehicle and fuel prices. The Transport and Housing Bureau (THB) notes that Hong Kong's vehicles have increased at an acceptable rate in recent years, with an average annual growth rate of 1.5% in the past 10 years. THB will continue to monitor the increase of vehicles, and will review and implement necessary measures from time to time to improve traffic conditions.
Ends/Wednesday, November 14, 2007
Issued at HKT 12:16
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