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Price adjustment mechanism for dedicated LPG filling stations

Responding to views expressed by some members of the taxi and light bus trades on the operation and price adjustment mechanism of dedicated liquefied petroleum gas (LPG) stations, a Government spokesman reiterated today (February 27) that since the introduction of automotive LPG in 2000, the trades had been able to pay less for fuel.  

After the price adjustment on March 1, prices of LPG per litre at dedicated LPG filling stations would still be about 45 per cent lower than the price of diesel with equivalent energy efficiency.

The spokesman said that with a diesel to LPG energy efficiency ratio of 9:7, the equivalent diesel price was $6.35 per litre while the LPG price at dedicated LPG stations was $3.50 per litre, resulted in a saving of $2.85 for drivers on fuel cost per litre.

He pointed out that the effect of waiving the land premium of dedicated LPG stations in 1999 had been fully reflected in the LPG ceiling price formula proposed by the operators through tendering.  The LPG prices at dedicated LPG stations therefore could be lower than those of non-dedicated stations.  
In 2001, it also caused the LPG prices of non-dedicated stations to be reduced drastically by $1 per litre. The recent adjustment of the LPG retail prices was merely due to the increase in international LPG prices, he said.

The spokesman said that under the new arrangement, LPG prices at the dedicated LPG stations, as in the past, would continue to be adjusted following the international LPG prices.  Since the two elements of the pricing formula (LPG international prices and LPG operating prices bid by the contractors) would remain unchanged, the new mechanism would not have much impact on the trade.

Under the new mechanism, the major change was to adjust the price once a month instead of every six months, so that the movement of LPG prices would follow closely the international market.

However, the spokesman stressed that the new mechanism would also be applicable when international prices dropped. It was not possible, therefore, for operators of the dedicated stations to increase prices quickly and reduce prices slowly.

The Government would announce the international LPG prices on a monthly basis so that the transport trade could monitor the price changes at the dedicated stations. Furthermore, the Government would invite the operators of the dedicated LPG filling stations to hold meetings with the transport trade every three months to listen to their views.

The spokesman said the last price adjustment under the old arrangements took effect on February 1 this year (reflecting the change of international LPG prices and the Composite Consumer Price Index from July to December, 2005).  The adjusted LPG ceiling price at dedicated filling stations increased by 35 cents per litre.  

The Electrical and Mechanical Services Department announced on February 25 the adjusted LPG ceiling price at dedicated stations for the period between March 1 and 31, 2006. This would be the first adjustment under the monthly adjustment mechanism introduced on February 1 (reflecting the changes in international LPG prices in February, 2006).
After adjustment, the LPG ceiling price at dedicated filling stations would be increased by 64 cents a litre.

The spokesman said that the Government had conducted initial consultations with the trades since April 2005 on the LPG ceiling price adjustment mechanism of dedicated LPG filling stations.

A joint departmental working group had subsequently discussed the details of the ceiling price adjustment mechanism with the taxi and light bus trades and they did not object to the new adjustment mechanism introduced on 1 February this year.

The Legislative Council¡¦s Panel on Transport had also held multiple meetings to discuss the issue in detail and met with 17 taxi and light bus associations on February 24. Only one association objected to the new adjustment mechanism.

The spokesman said while the Government understood well that the transport trades were facing various competitions and increases in operating cost, he called on them to express their views and continue the communication through established channels, as well as not to take any action that would affect the public and the local traffic.

He added that the Government would closely monitor the queuing time at dedicated LPG filling stations and would ask the operators of the LPG dedicated filling stations, wherever the maintenance requirement and storage capacity could permit, to deploy as many nozzles as practically required.

Ends/Monday, February 27, 2006
Issued at HKT 19:54