How to make oil firms fight and reduce prices

TIPCO ITEM: Follow-up to our Postscript last Tuesday about an irate landowner threatening to sue the mayor of Mabalacat, Pampanga, and the giant paper mill Trust International Paper Corp. (TIPCO) over the dumping of noxious wastes.

When I said, "The newsprint mill is lucky it is identified with the owners of a major newspaper and is the biggest taxpayer of Mabalacat," I was referring to the Philippine Daily Inquirer controlled by the Prieto family.

A businessman familiar with TIPCO operations told me yesterday that PDI chairman Marixi Prieto is neither an officer nor a major stockholder of TIPCO.

I know that TIPCO is actually controlled by Formosa Plastics, a Taiwan-based giant petrochemical corporation, and that the Prietos are just a minor player. But I did not know that Mrs. Prieto’s share is less than 1 percent. I thought it was more.

That was why I advisedly said "identified with" and not "controlled by…." The common impression, especially in our town, is that TIPCO is controlled by the same family that controls the Inquirer.

In fact, the businessman told me, the Prietos may even be considered a competitor of TIPCO since they operate a family-owned paper mill in Samal town (pop. 30,000), in Bataan, that supplies about half of the newsprint used by PDI publications.

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RECEIVERSHIP: A business editor told me that although TIPCO appears to be a robust business, churning out in its 24-hour operation some 800 tons of paper a day and exporting more than half of it, it has gone into receivership to keep jittery creditors at bay.

With its inability to pay its debts on time and with bill collectors knocking on its door, TIPCO has asked for more time (and was allowed by government) to restructure its bad debts and work out a revised payment schedule.

Newsprint, which comes in big rolls (like giant toilet paper rolls about two meters in diameter), is sold locally at around P40,000 per ton. If exported, it fetches a price of about $550 per ton.

You can compute TIPCO’s gross monthly sales by multiplying its daily output of 800 tons by 30 days and then multiplying the product by the selling prices given above.

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RECYCLED PULP: The main reason why newspapers have become very expensive is that newsprint alone accounts for about 70 percent of production cost.

This is anomalous, because the bulk of expenses must go to people, to the staff, and not to the paper mill or to the paper merchants. In many American newspapers, newsprint eats only 30-40 percent of costs.

(Don’t look now, but with Value-Added Tax having fallen on us, the price of newspapers might go up. Some of us may end up reading only the upper half of the front pages as newspapers lie, unsold, on the sidewalk.)

Thank gad, TIPCO and, I think, the Bataan mill of the Prietos use old newspapers as raw materials. No trees are cut to provide pulp for their mills.

They import old newspapers because newsprint used abroad has long fiber, which makes the paper less prone to snapping when the web (rolled paper) passes at high speed through the cylinders of the offset printing presses.

The old newspapers are dumped into big tubs, like giant washing machines, where the soaked paper is shredded, swirled around and treated with chemicals (including bleach). The cleaned pulp is then made into brand-new (recycled) paper.

The process produces considerable liquid and solid wastes, whose disposal has been a thorny issue among environmentalists and communities that may be exposed to the noxious by-products.

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VAT SCOURGE: It was unavoidable that I mentioned Value-Added Tax above. Let us face it – the VAT scourge is upon us.

What is sad is that our own leaders, who are sworn to protect us, are not telling us enough of what is going on. Instead, they seem to be busy consolidating power and amassing more wealth.

We should at least know what hit us and why. Like why, later, there could be organized resistance that might spread to all exorbitant impositions in general. Or why there could be civil disorder and protest marches.

Our people are used to hardship, but with many of us not earning enough to provide for the reasonable needs of our families, we can take only so much pressure.

We are saddened by government efforts to hide or gloss over some facts that, if known by the people, would have raised enough resistance to foil passage of the VAT law.

Sometimes we wonder to whom the Arroyo administration owes loyalty: to the Filipino people or to its foreign creditors and the IMF-World Bank.

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CUMULATIVE TAX: It might be a bit late, but let us look again at these points that were not discussed adequately by government with the very people targeted by VAT – the consumers.

The real impact of VAT on the end-buyer, or the last one to buy an item, is not only 10 percent, but even more. But the pricing scheme is such that the end-buyer is not aware he had been hit by more than 10 percent.

The price of an item grows not only because of the successive markup by VAT-able merchants handling it along the distribution chain but also because of the VAT repeatedly tacked on at every stage.

The cumulative effect is that the final retail price is actually padded by more than 10 percent of the original price (when the item was first introduced into the market).

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SOLE TARGET: Nobody else but the end-buyer, or the ultimate consumer, will shoulder or pay IN ITS ENTIRETY the accumulated VAT added or built into the final retail price.

The merchants will not share even one centavo of the VAT component of the price as they will be refunded or credited for their so-called input VAT (the VAT they paid when they bought the goods to resale).

Part of the dark side is that businessmen who cheat on their VAT refund or credit will even cash in on the VAT transaction at the expense of the government and the consumer.

Merchants are VAT collection agents of the Bureau of Internal Revenue. With their and the BIR’s dismal record, what guarantee is there that they will remit to the government the VAT collected by them?

With VAT, we may have created another huge corruption machine.

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PAHIRAP: Even without the usual hanky-panky, the estimate is that the government will eventually receive only 30 percent of the VAT paid by the end-consumers.

Under the VAT law, the bulk (70 percent) of the VAT collected from consumers will go to businessmen and not to the government. This is because merchants are allowed to retain a share corresponding to 70 percent of the input VAT they had paid.

For a measly 30 percent of the taxes collected from consumers, the administration worked out such a complicated, controversial and corruption-prone VAT system!

Theoretically, businessmen are lugi (incurring loses) if they can recover or refund only 70 percent of the input VAT they had paid.

That is theory. All serious businessmen I have talked with told me they would look for a way to recover the 30 percent taken from them, and maybe even get more. One way is for them to raise prices.

As always, it is the long-neglected consumer who will absorb all that pahirap (torture).

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FUEL PRICE WAR: I have mentioned this before, but with gasoline prices ever on the rise, especially with VAT last Tuesday, I want to share this scheme of some motorists aiming to hit back at profiteering oil companies.

This campaign is spreading only via email in the Internet so not everybody is aware of it. Hence, this much-needed assist. Part of the email says:

Currently, the price of unleaded gasoline is over P33 and still rising. The price of a barrel of oil has gone down to $62 from $70 (when Superstorm Katrina hit New Orleans), but gasoline prices are still going up instead of down. The big players claim that they are losing money.

It is time we motorists took aggressive action to teach them that BUYERS, NOT SELLERS CONTROL the market.

The only way to force down prices is to hit back by not buying their gas! We can do that without hurting ourselves. Since we all rely on our cars, we cannot just stop buying gas. But we can have an impact if we all act together to force a price war.

Here is the idea: For the rest of the year, DO NOT BUY GASOLINE FROM THE TWO BIGGEST FOREIGN OIL COMPANIES. Buy only from Petron and/or small players such as SeaOil, Total, etc.

If these two oil companies are not selling any gas, they will be forced to reduce their prices. And if they reduce their prices, other companies will have to follow. Thus, the start of a price war. The buying public wins.

To have an impact, we have to reach millions of these two oil companies' gas buyers. Let us spread the word about this boycott.

I don’t know what you think, but there it is.

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