MANILA, Philippines—Instead of encouraging the use of locally produced fuels, the government itself is going against efforts to achieve energy self-sufficiency by imposing heavy taxes on indigenous fuels, an industry executive said.

Ricardo Tantoco, executive vice president and chief operating officer of the Lopez group’s First Gas Power Corp., said that while the governments of Indonesia, Malaysia and Thailand hardly imposed royalties on their indigenous fuels, the opposite was the case in the Philippines.

“The Filipino government, in effect, through our distorted tax policies, is encouraging the use of foreign fuels—thereby creating jobs in foreign countries—rather than helping in developing our domestic sources of fuel,” Tantoco said in a statement.

With oil prices now averaging at around $130 a barrel, Tantoco said, it would be crucial for the government to recognize the need for measures that could help bring down fuel prices and power rates.

Natural gas, for example, is slapped a royalty tax of a high P1.79 per kilowatt-hour, Tantoco said.

“Then, there is the VAT [value-added tax] of 12 percent,” he added. “This adds another P0.21 per kilowatt-hour, bringing the total to over P2.00 per kilowatt-hour.”

First Gen Corp. president Federico Lopez said in an earlier interview that if natural gas royalties could be scrapped altogether, customers in the franchise area of the Lopez group’s power retailer Manila Electric Co. (Meralco) could enjoy savings of between P0.50 and P1.46 per kilowatt-hour.

Meralco gets more than one-third of its supply requirements from First Gas’ 1,000-megawatt Santa Rita and 500-megawatt San Lorenzo gas-fired power plants.

Lopez said removal of the P1.46 per kilowatt-hour in royalties would mean a revenue loss of $600 million a year for the government, and the government could rely on the additional revenues from higher taxes on industries.

For Meralco customers, he said, scrapping the natural gas royalties could translate to savings of around P0.50 per kilowatt-hour. (Inquirer News Service)