Fuel tax subsidies halted; price cuts may dwindle

A duty subsidy of NT$1.3 and NT$1.4 per liter for gasoline and diesel, respectively, will now be suspended due to a stabilization of international oil prices, economics minister Yiin Chii-ming said yesterday. The shortfall will be made up for by extra cash from consumers, CPC and the government alike.

In other words, a reduction of NT$0.9 in gasoline prices, as determined by the so-called price-floating mechanism, will translate into a reduction of only NT$0.3 for consumers, while the government and CPC will each absorb NT$0.3.

Based on the price floating mechanism, gasoline and diesel prices should fall by about NT$0.5 per liter starting Saturday. With the suspension of the subsidization, the size of the reduction will only be about NT$0.1 to NT$0.2 per liter for the consumer.

The absorbing of the subsidization shortfall will only be effective when there is a price decrease of fuel, based on the floating mechanism. When there is a price hike, the measure would not apply.

The government imposed a commodity duty subsidization back in May when the new administration took office and lifted a price freeze that the former Chen Shui-bian administration put in place, in what many critics said was a stunt to gain more votes for the DPP presidential candidate, Frank Hsieh.

The subsidization plan was enforced to prevent an all-out price increase, which was feared to destabilize the Taiwanese economy.

Under the plan, the government subsidized NT$1.3 of the NT$6.83-per-liter duty for gasoline and NT$1.4 of the NT$3.99-per-liter duty for diesel.

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