Editorial: Make fuel reform work for everyone

Mon, Jul 30, 2007 - Page 8

The government announced last Wednesday it would offer fuel subsidies to public transport operators to prevent inflation while encouraging people to use mass transportation systems.

Under the government's plan, the state-run CPC Corp, Taiwan (CPC) agreed to provide buses with a subsidy of NT$3 per liter of diesel and taxis NT$2 per liter of gasoline.

The company said it would stop the subsidies when fuel prices drop or if taxis or buses hiked fares.

But this leads to a tricky question: Should taxis be treated as part of the public transportation system?

The privately run Formosa Petrochemical Corp seemed more cunning than CPC when it instead offered a fuel subsidy of NT$3 per liter to bus operators on Thursday, but not the NT$2 per liter subsidy for taxis.

Apparently policy makers view taxis as a part of the public transportation system.

Some people disagree, saying a public transportation system refers to rail and bus services, or ferries in certain regions. They say services like taxis usually depend on a vehicle with no more than four seats, driver excluded.

Therefore, from an energy conservation perspective, taxis require more rides and energy than other forms of mass transportation.

The fuel subsidies also beg the question of fairness. Every time CPC announces plans to raise fuel prices, it justifies them by saying that it isn't fair to ask taxpayers to subsidize motorists.

But is it now reasonable for some taxpayers who cannot afford -- or prefer not to take -- taxis to bear the price burden for other better-off taxpayers who do use the service?

Taiwan imports more than 98 percent of its energy, and the public feels the financial pinch whenever energy prices rise. So far this year, domestic gas prices have increased by NT$3 per liter or 8.6 percent on average, CPC data shows.

To ease public worries about rising prices, the government has initiated several measures. But it is unclear whether the government wanted to make inflation or energy conservation the top priority when it announced the subsidies.

If the government hopes to help people conserve energy, is it better to offer biodiesel subsidies to all motorists -- in a bid to promote renewable energy and reduce greenhouse emissions -- than provide gasoline subsidies to taxi drivers?

Finally, there is still the question of whether politics played a role in the fuel subsidies as it has in other economic policies. Were the government's actions meant to win over voters ahead of legislative and presidential elections?

To reflect the real cost, the government has reiterated its determination to continue the floating fuel pricing mechanism, in which the CPC has, since September, linked domestic fuel prices to benchmark crude oil prices in New York.

As a result, there is only one question left about fuel subsidies: Does the government want the market mechanism to prevail?

Unfortunately, policy makers have moved in the opposite direction. The government didn't offer a long-term strategy to increase public confidence in transportation prices. Instead it dished out perks only a few people would appreciate.

If fuel subsidy measures are only introduced to build support for the ruling government, they do not serve the interests of the nation as a whole.