Councilor bats for suspension of taxes on oil, return of OPSF

By Francis Allan L. Angelo

A member of the Iloilo City Council urged Congress to suspend taxes on oil and reinstitute the Oil Price Stabilization Fund (OPSF) to address the effects of incessant fuel price hikes.

In a privilege speech during their session on Oct 26, 2021, Councilor Rommel Duron, chair of the committee on transportation, said the two measures will cushion the effect of oil price hikes in a country that is dependent on petroleum.

“We are an oil-dependent nation, and therefore, our economy, our way of life, is highly susceptible to such volatile movements of oil prices in the world market. Our government must seek a more permanent solution or even a defensive shield that will protect our economy from such dire economic upheavals,” Duron said.

The OPSF was established in 1984 to create a buffer that will protect the economy from fluctuations in the price of oil.

“Whenever there is an impending oil price increase, the fund automatically kicks in with a subsidy and absorbs the cost of the price increase on the market. This cushions the impact not just on the transport and other oil-dependent sectors but also the consumers who face the prospect of rising prices of goods following an oil price increase” Duron explained.

But the OPSF was discontinued during the term of President Ramos when the oil industry was deregulated in 1998.

There is also a suggestion to temporarily suspend or lower the collection of excise taxes on oil to lower pump prices.

Duron, who once worked for the Transportation Franchising and Regulatory Board (LTFRB), said the suspension of taxes on fuel products would result in at least 20 percent decrease in pump prices.

“However, this will need an act of congress. Congress must also consider not just a suspension of taxes but the reestablishment of the OPSF or a similar funding mechanism that will provide economic relief for our suffering people. I hope our senators and congressman can put their acts together, set aside petty political squabbles and hear the anguish of our people in their time of need,” he added.

Duron said his suggestion was borne out of the consultation he conducted with the transport alliance in the city last Oct 21 after the sector filed a petition for fare hike with the LTFRB.

The petition will increase basic fares from P9 to P11.50 for the first four kilometers, citing the unabated increase in fuel prices.

“The consultative meeting was very fruitful but very sad. Any increase in transport fares have a domino effect or chain reaction. A spiral in the prices of goods and services will naturally follow,” he said.

Duron said the average fuel pump price of diesel escalated from P40 per liter to P50 in just a couple of months. Gasoline now costs nearly P60 per liter after spiking by more than 20 percent.

 

“Because of the increases, the drivers’ earnings were reduced by at least P200 per day. Maayo na nga adlaw kon may dala ang aton mga drivers sang P100 to support themselves and their families,” he added.

The national government’s response to the fare hike petition is to provide P5,000 subsidy to public transport drivers in Metro Manila and parts of Luzon.

The Development Budget Coordination Committee (DBCC) said the government will release P1 billion to LTFRB to provide cash grants to around 178,000 public utility vehicle drivers for the remaining months of 2021.

“But many drivers, however, prefer a fare hike over subsidy. Especially kon one time subsidy man lang. Maayo tani if the subsidy is sustained every month until the fuel crisis is over,” Duron said.

The Department of Energy last week said it is studying how it can tap the excise taxes collected under the Tax Reform for Acceleration and Inclusion (TRAIN) Law to fund the fuel subsidies.

“Pump prices have been hiked for the past nine straight weeks, with latest data available indicating year-to-date adjustments at a total net increase of P19.65 per liter for gasoline and P18.00 per liter for diesel. Excise taxes on fuel, if I can recall is 10 percent per liter for gasoline and six percent for diesel fuel. If you buy P1,000 worth of gasoline or diesel fuel, the drivers or consumers are paying the government P100 and P60, respectively, in excise taxes,” Duron explained.