Enrile seeks cut in royalty, tax on indigenous energy resources

Senate President Juan Ponce Enrile has urged Congress to enact a law reducing the tax or royalty on indigenous energy resources to allow end-users to fully benefit from the cut.

In Senate Bill No. 2, Enrile proposed the reduction of government share in indigenous energy resource utilization to three percent of the net proceeds from the sale of the energy resource over the life of the relevant service contract.

He proposed that any distribution utility benefiting from the reduction shall pass on the full reduction in electricity price to customers thereby, lowering the retail rates of electricity.

According to Enrile, the country has not yet fully benefited from the availability of rich energy resources despite the passage of the Renewable Energy Act in 2008 because of high government impositions for their exploration, exploitation and development.

“Government impositions associated with making available such resources for electricity generation are more burdensome than those applied on imported fuels such that rates of electricity generated using indigenous energy resources are rendered artificially high,” Enrile observed.

As of May 2007, government royalties (or government share) on indigenous natural gas was around P1.46/kWh. Enrile pointed out this is five to eight times more than the taxes imposed on imported fuels such as coal (P0.17/kWh), oil (P0.20/kWh) and liquefied natural gas (P0.29/kWh).

Indigenous petroleum which is intensively used for generating electricity is subjected to royalties of about 60 percent, while other local extractive industries such as mining enjoy a much lower tax rate of 3 percent, he added.

“Thus, instead of enjoying lower electricity rates, the Filipino is effectively being penalized for utilizing its own energy resources,” Enrile said.

“In addition, because of the disparities, the country’s energy self-sufficiency is being held on a tight leash of its own making — a regrettable stance in the face of volatile energy prices in the international markets,” he also said.

He stressed that countries like Thailand, Indonesia, Malaysia and Vietnam’s royalties/taxes on oil and gas are comparable with that of the Philippines but domestic use of these indigenous natural resources are afforded substantially lower prices.

Enrile stressed that in the Meralco franchise area alone, a reduction of government royalties will mean a reduction of electricity rates to as much as P0.50/kWh for all customers.

“There is more need for competitiveness and greater productivity now when millions of Filipinos are reeling from the effects of the global financial crisis,” Enrile said.

Hannah Torregoza, Manila Bulletin