Fri, May 23, 2008 - Page 1 News List

Cabinet decides on fuel, electricity hikes

FIRST STRIKE Price hikes topped the agenda as the new Cabinet got down to work yesterday at its first weekly meeting. But officials were mum on the actual numbers

By Shih Hsiu-Chuan  /  STAFF REPORTER

Premier Liu Chao-shiuan, second right at front, talks to members of his government as the new Cabinet has its photo taken yesterday.


The new Chinese Nationalist Party (KMT) government will remove the freeze on fuel and electricity rates imposed by Democratic Progressive Party (DPP) government last December, with fuel prices set to rise next month and electricity rates going up in July.

Officials made the announcement at a press conference after the new Cabinet’s first weekly meeting.

“The extent of the hike in oil price will be declared on June 1, while the electricity rate hike will be put into effect in July,” Minister of Economic Affairs Yiin Chii-ming (尹啟銘) said.

The DPP government froze utility prices last December, amid the rise in international oil and commodity prices.

“The previous policy of freezing the prices has had consequences, which has made it necessary to adjust the prices,” Premier Liu Chao-shiuan (劉兆玄) said.

Those consequences were: a failure of utility prices to reflect their actual costs — violating the “user pays” rule, huge losses for CPC Corp, Taiwan (台灣中油) and Taiwan Power Co (台電), the fueling of inflationary fears, energy inefficiency and lack of incentive to reduce carbon emissions, he said.

The Cabinet did decide on the percentage by which the oil and electricity prices would be hiked, but refused to announce them. Officials said the Cabinet was following a convention of declaring the actual rate hikes on the first day of the month the hikes take effect.

“After adjusting the prices, Taiwan’s oil prices will still be the lowest of Asia’s four little dragons, and the electricity rate will be slightly higher than South Korea’s, which has frozen its electricity price,” Liu said.

Without the price freeze, Liu said oil prices would be NT$5.2 more, while the price of diesel would have gone up by NT$5.8 this month.

“It that had happened, we would not have to raise the prices significantly now,” Liu said.

The price-hike proposal will go along with an extra budget of NT$ 114.4 billion (US$3.747 billion) for the rest of the year, which officials said would offset the negative impact of rising energy prices on economic growth.

“The price hike is expected to cause 0.5 percent drop in economic growth, but the extra budget, the opening of up of the country to Chinese tourism and the implementation of cross-strait weekend charter flights will have a positive contribution to economic growth,” Council of Economic Planning and Development Chairman Chen Tian-jy (陳添枝) said.

Chen said an increase of 0.42 percent in annual economic growth is expected with the whole package, which will bring this year’s economic growth rate to close to 4.8 percent.

Of the extra budget, NT$12.5 billion will be used to compensate public transport and taxi drivers for increased fuel costs and NT$78.3 billion was earmarked to help local government complete public infrastructure projects.

Chen said the government would not raise public transport or taxi fees for six months.

Meanwhile, President Ma Ying-jeou (馬英九) promised yesterday to map out supplementary measures to minimize the impact of oil price hikes.

“What needs to be done needs to be done,” he said. “The process may be painful, but the longer we wait, the more painful it will be.”

Ma said the price hikes were bound to invite criticism, but a responsible government must do the right thing even if it comes under criticism.

The situation might develop in an averse direction if public expectation for a price hike continues, he said, adding that he was not sure whether the CPC, Taiwan and Taipower will be able to bear the losses until the end of this year if the prices did not go up.

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