Lowering fuel duties counterproductive, will amount to subsidising private transport: Lawrence Wong

Such a move effectively amounts to a subsidy on private transport, said Finance Minister Lawrence Wong. PHOTO: ST FILE

SINGAPORE - Reducing or suspending petrol and diesel duties to cushion the impact of rising fuel prices on motorists and transport operators here will have counterproductive effects, said Finance Minister Lawrence Wong on Monday (April 4).

Such a move effectively amounts to a subsidy on private transport, said Mr Wong.

Fewer than four in 10 households in Singapore own cars, he noted. Among the lowest quintile, only about one in 10 households do.

A reduction in fuel duties or the provision of road tax rebates would hence benefit this "relatively small but generally better-off group", Mr Wong said in Parliament.

Should fuel duties be cut, some of the subsidies will also flow back to fuel producers and suppliers instead of just consumers as pump prices may fall by a smaller margin than the reduction in duties.

More crucially, such a move will also reduce the incentive to switch to more energy-efficient modes of transport, which is a critical element in Singapore's plans for sustainable living, Mr Wong added.

The minister was responding to calls from seven backbenchers - Mr Murali Pillai (Bukit Batok), Mr Edward Chia (Holland-Bukit Timah GRC), Mr Xie Yao Quan (Jurong GRC), Ms Mariam Jaafar, Dr Lim Wee Kiak (both Sembawang GRC), Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Workers' Party MP Louis Chua (Sengkang GRC) - to temporarily lower fuel excise duties, give road tax rebates or provide other support in the light of spiralling fuel prices.

Fuelled by the war in Ukraine and subsequent sanctions on Russia, prices at the petrol pump climbed to $3 a litre or more in early March. Pump prices have fallen since then due to easing oil prices, with all brands of 92-octane fuel and one 95-octane dipping below $3 as at Monday (April 4).

Mr Wong said on Monday that he understood why MPs had asked the Government to reduce or suspend fuel duties in the light of the rise in pump prices.

But he said the better way to help Singaporeans cope with rising fuel costs, and inflation in general, is to provide them with support through measures that have been catered for as part of the Budget this year. These include rebates for service and conservancy charges and utility bills, as well as increased assistance for the lower-income.

The $100 of CDC Vouchers for every Singaporean household announced in the Budget will also be disbursed sooner, by mid-May, he added.

"Through these measures, we are extending concrete help directly to Singaporeans to cope with their different areas of needs, including their utility bills, children's education, and daily essentials, and we are providing more targeted help for the lower-income groups," he said.

Mr Wong said he recognised that some groups, such as cabbies, private-hire car drivers and delivery riders, have been affected by increases in petrol and diesel prices.

He noted that taxi and private-hire car operators have implemented temporary increases in fares to cushion the blow of higher pump prices, and have consumers share this burden.

He also noted that these operators have tie-ups with petrol companies to offer fuel at discounted prices.

He urged those who are in need of financial assistance to approach social service offices, community centres, or self-help groups.

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Petrol duties were raised just a year ago, in February 2021, for the first time in six years.

Duties went up to 79 cents a litre for premium grades (98-octane and above) petrol, and 66 cents a litre for intermediate grades (92-octane and 95-octane).

The increases of 15 cents a litre for premium grades and 10 cents for intermediate grades were meant to set price signals and change behaviour in order to get drivers to either switch to electric vehicles or drive less, then Finance Minister Heng Swee Keat had said.

Mr Wong said on Monday that the Government collects fuel duties and road taxes for revenue, as well as to price in the negative externalities of vehicle transport, such as the impact on public health and the environment.

Over the past five years, the Government has collected an average of $920 million a year in fuel duties at the pump.

This has gone towards various programmes and subsidies that directly benefit Singaporeans, Mr Wong added, including spending on public transport infrastructure.

During the subsequent debate, Mr Wong reiterated that the fuel duties play an important role in Singapore’s plans to become more sustainable.

“We all talked about wanting to move greener, wanting to embrace more energy-efficient modes of transport, a point which everyone supported, incidentally, in this House not too long ago,” said the minister, referencing the debate in March on the Government’s green plan.

“And then now, at the first sign of price rising, we are wanting to withdraw so quickly? So let’s have some perspective... yes we have, indeed, an immediate issue of inflation to tackle, but we also want to press ahead with our net-zero plans and our green transition, and these duties are there for that important purpose.

"It doesn’t mean we will not do anything to help the affected groups at all, because we will find other ways to help.”

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All MPs of the 14th Parliament, which opened on Aug 24, 2020, were able to conduct parliamentary proceedings while seated on the same floor.

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