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New Fuel Tax Introduced With Offsetting Price Cuts

The long-anticipated fuel tax rise has come into effect, with, as expected, an offsetting cut in gasoline pump prices.

The National Development and Reform Commission has announced that fuel consumption tax will increase from 0.2 yuan a liter to 1 yuan a liter on gasoline and from 0.1 yuan  a liter to 0.8 yuan a liter for diesel.  At the same time, the retail price of gas has been cut by 0.91 yuan  per liter, and of diesel by 1.08 yuan, as of midnight Thursday.

Corresponding tax rises and price cuts for commercial gasoline and diesel and jet fuel were announced the day before to take effect on January 1st. Six categories of tolls for road and waterway maintenance and management will be scrapped the same day.

The changes are part of a drive to make China’s energy use more efficient through market based pricing, but the actual impact will be small to start with. No chances are being taken with depressing demand given the overall economic slowdown.

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