BEIJING - CHINA plans to relax controls on fuel prices as long as crude oil stays below $130 a barrel and ease curbs on refiners under a long-awaited reform plan, an official source familiar with the issue said on Friday.

The source confirmed a report in the official Shanghai Securities News, which quoted unnamed sources as saying that when crude was below $80 a barrel, refiners would be able to set fuel prices in line with crude. With crude between $80 and $130, they would have to accept reduced profit margins.

The new pricing scheme would also set a limit of 800 yuan per tonne under which the maximum retail price could move within a month, and a limit of 1,600 yuan per tonne for price movements within three months, the newspaper said.

But refined oil prices will still only be allowed to fluctuate at intervals of at least 10 days, the official source told Reuters.

The source also stressed that all the plans would be published to seek public opinions and altered, if necessary, before taking effect.

The reform package will allow retail prices to rise 4 percent above refinery gate prices, after factoring in the cost of transport and distribution, the official source said.

Refinery gate prices include crude costs, processing costs and a 'reasonable profit margin'.

Chinese media reports have said the average international crude price is determined by calculating a basket of Brent, Dubai and Minas blends of crude oil.

The government also intends to raise the refined oil consumption tax, which will be renamed 'fuel consumption tax', to replace road and waterway tolls and fees and some road charges, the official source told Reuters. The relevant road charges will be scrapped on Jan 1, 2009.

The fuel consumption tax, covering seven refined products, will be raised sufficiently to replace the revenue from the scrapped tolls, fees and charges, totalling around $24 billion (S$36.17 billion) a year.

The tax is now levied on refiners, but the reform envisages moving the burden to fuel wholesalers at an appropriate time.

Although the reform plan aims to loosen prices, fuel prices for rail freight will be set once a year, based on the previous year's diesel price, and airlines' fuel surcharges will be adjusted every six months, based on the previous six months' prices for jet kerosene.

Many fuel users, such as those in the farm, fishing, forestry and urban transport sectors, will continue to get state subsidies to offset the cost of fuel.

And local governments, who can expect to receive tax payouts in line with their previous revenues from transport tolls and charges, will be left to decide the prices for taxis.

Many taxi drivers have gone on strike across China in recent weeks, partly in protest at the high fuel prices, which China's rigid price control system has left at a premium to US pump prices. -- REUTERS