Various groups buck baseoil tariff hike

Government agencies, transport groups and the local oil industry in general have joined hands in opposing Senate Bill (SB) 2203 which seeks to increase the tariff on imported baseoil and lubricants from three percent to 20 percent.

Pilipinas Shell Petroleum Corp., operator of the only baseoil refinery in the Philippines, is supporting the bill.

In a hearing conducted by the Senate ways and means committee headed by Sen. Juan Ponce Enrile, Socioeconomic Planning Secretary Felipe M. Medalla said the proposed legislation will give undue advantage to one entity at the expense of the entire oil industry.

Enrile is the author of SB 2203 while his counterpart in the House is Rep. Danilo Suarez.

"It will create an uneven playing field in the baseoil and lubricants market. The employment argument of Shell is not a strong one," Medalla, who is also director general of the National Economic and Development Authority (NEDA), said.

Likewise, the Cabinet secretary pointed out that increasing the tariff to double-digits runs counter to the single-digit regime under the ASEAN Free Trade Agreement (AFTA) of which the Philippines is a signatory.

"Our commitments (to the AFTA) will be threatened or compromised," Medalla added.

Representatives of the Tariff Commission and the Bureau of Customs said imposing an additional 17-percent import tariff would not result in additional revenues for the national coffers. They said the bill would only result in lower importations thus possibly reducing revenues rather than increasing it.

Representatives of Caltex Philippines Inc., Petron Corp., Total Petroleum Philippines Inc., Unioil Petroleum Corp., and Castrol Philippines Inc. presented their individual opposition in the said hearing.

Petron Corp. chairman Jose Syjuco Jr. has lashed out at Pilipinas Shell Petroleum Corp. for calling it "unnationalistic." He said the bill will give birth to a monopoly in the baseoil sector.

Transport groups, which formed a loose coalition versus the bill, lambasted Suarez for allowing the proposed legislation to pass the House without consulting their sector.

"The haste in which the bill was passed smells like a rat, characteristic of an influential and moneyed lobby," they said in a joint statement. "If the two pieces of legislation is passed into law, we will have to pay higher costs for lube-based products. This additional cost will ultimately be passed on to the ordinary consumer."

The two pieces of legislation introduce a 15-percent import tariff on baseoil and lubricants (if sourced within the Asia Pacific region) or a 20 percent tariff (sourced outside the region).

The Shell refinery produces Grade 1 baseoils, which in turn produces a host of products such as lubricants and asphalts.

The refinery is capable of supplying most of the domestic requirements for Grade 1 category baseoil or roughly 100,000 barrels more that the 1.2 million barrels required by the market. Nearly 60 percent of the entire baseoil requirements of the country is sourced locally while 40 percent represent importations.

Grade 2 to 5 category baseoil are not produced locally although the volume is lower than Grade 1.