Petron bucks hike in baseoil tariff

Industry leader Petron Corp. registered yesterday its opposition to a bill seeking to increase the tariff on baseoil saying the proposal "creates a baseoil monopoly that favors a single entity."

Senate Bill (SB) 2203, authored by Sen. Juan Ponce Enrile seeks to increase the tariff on imported baseoil from the existing three-percent to 20 percent.

In a position paper, Petron pointed out that there is only one existing baseoil refinery in the country representing only one company and does not constitute a threat to national security. Petron was referring to the baseoil refinery in Pililia, Rizal owned by Pilipinas Shell.

"The baseoil refinery does not produce sufficient quantities of certain baseoils. Even during ideal technical conditions, the Shell refinery can only produce an optimum of 130,000 metric tons of baseoils annually or 45,000 metric tons below the annual industry demand of 175,000 metric tons."

It added that Pilipinas Shell does not require protection through an increase in tariff since they already have a captive market of 70 percent of the total baseoil industry demand. "SB 2203 rewards inefficiency and gives Shell an undue advantage in supply, marketing and pricing of baseoil products," Petron said.

Petron said the proposed legislation runs counter to several government initiatives to cushion the rising prices of petroleum-based products and to the deregulation policy of government.

The increase in tariff is estimated to generate additional revenues of P379 million for the government. "But if it is the desire of the government to boost revenues, an increase in specific taxes would achieve the same result without giving undue advantage to a single entity," Petron said.

Total Petroleum Philippines Corp. (TPPC) said that if the proposed legislation is passed "consumers will pay P5 to P7 more for every liter of imported finished lubricant products."

In its own position paper, the Paris-based oil firm said that the additional tariff will negate the forecast revenue collection as it will "most likely result in lower importation volume of lubricant products and therefore, reduce government revenues."

It added that the country will be dependent on a single local source of baseoil and lubricants which could "lead to a national security problem if this single local baseoil refinery becomes inaccessible or inoperative."

Caltex Philippines Inc. said in a separate interview that the bill would create an imbalance in the supply of baseoil and its byproducts while forcing prices upwards. The local baseoil refinery simply does not have the capacity to supply the country’s demand for baseoil products.