MANILA, MAY 24, 2008
(STAR) By Donnabelle Gatdula - A day after the government announced the scrapping of import duties on crude oil to cut pump prices, oil firms announced another round of price increases.

Among those to be hardest hit by the increase are jeepneys, which are mostly fueled by diesel.

Eastern Petroleum Corp. president Fernando Martinez said the company has no choice but to raise its prices for diesel and gasoline by P1.50 per liter and P1 per liter, respectively, effective today.

Martinez said the move to adjust prices is unprecedented due to the continuing rise in international crude prices.

“It’s a matter of survival. Some of us have already entered into allocations, supplying only existing and loyal clients and dealers,” Martinez said.

Other oil firms, however, remained silent on whether they would adjust their prices this weekend. It is likely that a number of them will, within the same price range as they did in the past.

In a deregulated environment, competitive pressures typically drive oil players to adjust prices based on the market. So if an oil firm announces an increase or reduction in pump prices, the others tend to follow.

Martinez said they are trying to implement an allocation scheme that will enable them to stretch their inventories instead of buying oil products at current high prices.

This means that the oil firms will not replenish their inventories until after they have sold their current supply.

As of May 17, the suggested pump prices were P49.33 to P52.26 per liter for unleaded gasoline, P41.67 to P43.97 per liter for diesel, and P46.15 to P49.30 per liter for kerosene.

Oil firms increased their diesel prices by only 50 centavos per liter last weekend.

Later on, however, the oil companies realized that at the rate the global oil prices are rising, they cannot afford to implement minimal oil price adjustments.

The other day, the Department of Energy (DOE) approved a zero percent tariff rate on crude and refined petroleum products effective June 1.

This decision followed a 15-day review (from May 1 to 15) of Dubai and diesel benchmark prices in the international market.

Energy Secretary Angelo Reyes said he signed the certification specifying that oil import duties will be reduced to zero percent, from the one-percent rate in April and May.

The review is part of the automatic tariff adjustment mechanism which is based on certain trigger points indexed to international crude oil prices.

The average price of Dubai crude and diesel in the international market was above $115.46 per barrel and $153.52 per barrel, respectively, last May 1 to 15.

“We are faced with a regime of high oil prices. This is the reality and we should brace ourselves for adjustments in local pump prices. The benefits of the programs we are implementing to attain energy independence will not be immediately felt since most interventions in the energy sector are medium- or long-term in nature,” Reyes said.

Reyes said the DOE continues to implement existing programs aimed at achieving energy security and self-sufficiency to mitigate the impact on the general public of oil price surges in the international market.

These measures include advocating the efficient use of energy, promoting the biofuels program, advancing the renewable energy bill in Congress and continuing operations against colorum or out-of-line vehicles and kotong (illegal toll).

According to Reyes, there is also a move to create a transport fund that drivers and operators could tap into to convert their vehicles to liquefied petroleum gas (LPG) or compressed natural gas (CNG)-driven vehicles.

But the energy chief said in lieu of an additional subsidy from the government of P2 per liter of diesel for public utility vehicles, the amount could better be used to set up this fund.

“This will have a better effect on the quality and condition of their vehicles on the road and reduce air pollution,” Reyes said.

Reyes has been a staunch promoter of LPG and CNG as it is cheaper than imported gasoline, diesel and crude.

The P2 per liter subsidy was proposed by the Land Transportation Franchising and Regulatory Board on top of the P1 per liter discount given by the oil firms to the transport sector.

PLDT: Free text means low tax take By Mary Ann Reyes Saturday, May 24, 2008

Philippine Long Distance Telephone Co. (PLDT) yesterday warned that the proposal for mobile phone operators to offer free text messaging services to subscribers would reduce the government’s tax collection.

The statement was issued as the House of Representatives announced it would review the franchises of telecommunications firms to see if they were allowed to charge fees for text messaging.

Transportation and Communications Secretary Leandro Mendoza had earlier said the companies should make short messaging system or SMS free of charge.

In an interview, PLDT regulatory affairs and policy office head Ray Espinosa said that with billions of pesos in taxes being paid by mobile phone operators on their earnings, more than half of which come from text messaging, it follows that free text messaging would result in shrinking revenues for the government.

The telecommunications sector is currently one of the biggest sources of revenue in the form of different taxes and license fees.

The PLDT group, the largest mobile phone operator in the country, called on Congress and the government to consider the repercussions of the proposal.

PLDT’s subsidiaries include Smart Communications Inc., which in turn owns Pilipino Telephone Inc. (Piltel) and Connectivity Unlimited Resources Enterprise (CURE).

All three offer their own mobile phone services that include text messaging.

Espinosa emphasized that they have full legal authority and right to charge fees for text messaging, both under their legislative franchises, their certificate of public convenience and necessity (CPCN) and provisional authorities issued by the National Telecommunications Commission, as well as by virtue of NTC regulations.

From the commercial standpoint, he pointed out that offering text messaging services entails billions of pesos in investments from mobile operators.

“Why would anybody invest when they will not be able to generate revenues from it? More people are using text messaging than voice calls. Text messaging accounts for more than 50 percent of revenues. Will telecommunications companies put all these capacities if SMS is for free?” he added.

He also explained that SMS or short messaging service (text messaging) has been classified as a value-added service (VAS). “Does this mean that everything classified as VAS should be free? How about Internet? Should it also be given for free,” Espinosa stressed.

He likewise noted that SMS has been around since the early 1990s and that it is strange why this question is being raised only now.

Review of franchises

“We have to review the specifications of their franchise. We are in the middle of a very difficult economic situation and it will be a great help if we can remove the use of SMS from their daily budget,” Speaker Prospero Nograles said.

Three House committees – legislative franchises, information and communications technology and oversight committee – will be tasked to “find out” if these telcos “are really allowed to charge their customers for using SMS.”

Nograles said he will ask Reps. Ferjenel Biron, who heads the franchise panel, Joseph Santiago of ICT and Danilo Suarez of oversight, to “scrutinize” the legislative franchises of these companies, which have been raking in billions of pesos in profits for years.

In a statement, the Speaker expressed support for the position of Mendoza, who wanted SMS to be free of charge, as provided for in the telcos’ public franchise.

Nograles, a habitual texter himself who sends out comments to reporters via SMS, said this mode of communication “has become a necessity even among poor Filipinos who rely on this technology for their day-to-day personal and business communications requirement.”

The Speaker likewise floated the possibility that the House can also move to “amend the franchise of the country’s telecommunications companies to compel them to stop charging their customers for SMS use.”

“We have to check whether they are legally allowed to charge text messages. If their franchise allows them to do so, we can make corrective measures and file a resolution as soon as possible for the National Telecommunications Commission to address this concern.”

The Speaker also pointed out that telecom companies have been raking in billions in profits because they no longer pay the 3-percent franchise tax on gross receipts and are no longer subjected to the 12-percent cap in terms of income, based on return of investments (ROI).

Instead, they are required to pay the 12-percent expanded value added tax which they pass on to their consumers.

“This taxation system should also be studied to lower the present rates,” he said. – With Delon Porcalla

Chief News Editor: Sol Jose Vanzi

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