IPPCA rejected calls for the repeal of Republic Act 8479
Oil players belonging to the Independent Philippine Petroleum Companies Association (IPPCA) rejected calls for the repeal of Republic Act 8479, otherwise known as the Downstream Oil Deregulation Law of 1998 by various sectors including several lawmakers.
IPPCA which counts 12 members including such leading names in the independent oil industry such as Unioil Petroleum Philippines Incorporated, and Oilink International Corporation have taken the position that instead of repealing the aforesaid law, the government should check on the full materialization of the law’s provisions to ensure its success.
"Owing to its importance, we, at IPPCA have always welcome any moves to further hasten the full materialization of the noble purpose envisioned by the oil deregulation law, for we believe that the dynamism of the oil industry is better sustained through constant challenges,” IPPCA President Paul Co stated.
"The desired effects of the deregulation law are rapidly moving to its complete realization and yet unnecessary changes in the law slows down the momentum enjoyed by it,” Co added.
Stakeholders have cited that the growing competition in the oil industry evidenced by the burgeoning number of oil stations operated by the independent players as proofs that the deregulation law is clearly moving.
However, with the recent oil price increases brought by a volatile international market, calls have once again gained prominence calling for the repeal of RA 8479.
One of the proposed legislation being tackled by Congress, House Bill 1724 seeks to repeal the downstream oil deregulation law for its alleged failure to bring about real competition and prices in the oil industry.
Yet IPPCA said that the proposed legislation would not do any good to our country adding that the present-day competition that is taking place in the oil industry would suffer if RA 7924 were repealed.
"Repealing the law is totally missing the whole point. The culprit of the constant price increase is not lodge in the law. It is beyond the ambit of the law. In fact, our country has reaped enormous benefits from deregulation," said the group citing the increase in the number of gasoline stations and refilling outlets not only in Metro Manila but also even in the provinces.
"The oil deregulation law is not defective in any way. Scrapping it will not result in the reduction of petroleum product prices. External factors have to do with it. World market petroleum prices have relentlessly increased forcing companies to adjust their prices," the group also said that "local oil companies are forced to hike their prices to absorb their significant losses."
IPPCA also explained that with greater competition, consumers are "given several choices of quality products and suppliers aside from being offered with competitive prices that was never experienced during the regulated environment."
Citing a 2005 study conducted by the six-person Independent Review Committee (IRC) headed by Carlos Alindada, retired chair of SGV & Co. and a former commissioner of the Energy Regulatory Commission (ERC), IPPCA echoed the body's stand that "pricing for domestic crude oils is on export-parity basis and that domestic prices cannot but be influenced by international oil price fluctuations.
The 60-page report acknowledged weaknesses in the implementation of oil deregulation that resulted in "illegal, unsafe and unfair practices" like smuggling. Despite this, the report said, "Deregulation brings about market forces such as competition which has the tendency of reducing prices as against prices produced by a fixed formula which are not affected by market forces."
With regard to price increases, that was attributed not only to oil deregulation but also to the escalating world prices and fluctuations in the peso-dollar exchange rate.
Instead of repealing the law, the committee recommended that the Department of Energy (DOE) should monitor oil prices regularly and consequently to inform the public about their monitoring data and figures gathered.
Instead of tinkering away the said law, IPPCA said it is better if Congress would pass legislation such as reducing taxes levied on oil and oil products sold in the country. Indeed, at present times there are more than 50 percent of oil prices that were made up of taxes.
Co also said that the oil industry is the most heavily taxed sector of the economy and it is our fervent prayer therefore, instead of doing away with working law, why do we endeavor to pass laws that would lessen the taxes on petroleum products."
Earlier, Unioil also expressed their support to move in the Lower House to revert back to specific or excise tax system. So that consumers would not be unjustifiably burdened every time there is an upsurge in oil prices in the international and local market.
The current VAT law, tax for diesel is set at P6 per liter while tax for gasoline runs as high as P11 due to the VAT and the specific tax amounting to P4.35 per liter.
However, a bill authored by Antique Representative and House Committee on Ways and Means Chairman Exequiel Javier would see the imposition a specific tax system on oil and oil products being sold in the country instead of the VAT.