BY REGINA BENGCO

PRESIDENT Arroyo yesterday ordered a 1 percentage point reduction in the tariff on oil imports as part of mitigating measures on the rising world oil prices.

This would lower the oil import tariff from 3 to 2 percent.

Finance Secretary Margarito Teves said the tariff rate would still be lowered by another 1 percentage point because current world prices have reached the trigger for that level.

He said the trigger point for a reduction to 2 percent tariff is $80.94 per barrel for crude and $110 for diesel. For a reduction to 1 percent tariff, the trigger point is $93.28 per barrel for crude and $115.65 for diesel. To bring down the tariff rate to zero percent, the price of crude has to reach $106 per barrel.

He said the reduction would be "revenue neutral." He said government would have gotten a windfall of P11 billion if government did not bring down the tariff.

Arroyo said the executive order embodying her directives will be released today. The order will take effect two weeks after publication.

She appealed to oil companies to use the tariff reduction to lower diesel prices.

Teves said the reduction will cut the price of diesel by 46 centavos per liter.

However, motorists should not expect the price of diesel to go down when the tariff is adjusted because it will offset the planned increase in diesel prices.

"Motorists might expect lower diesel prices but oil companies are planning to increase diesel prices and the tariff adjustment will just offset it," Teves said.

The government decided to lower the tariff on crude so it would reflect directly on pump prices, Teves said. It had another option to just continue collecting the 3 percent and just "re-channel the windfall" from the levy to affected sectors.

Teves said the tariff reduction will cut gasoline prices by 23-25 centavos per liter, and 46 centavos for diesel.

Arroyo also issued the following directives:

• Fast-tracking of programs on increasing production and distribution of food, irrigation, farm to market roads and post-harvest facilities, and setting up of more barangay food terminals and Tindahan Natin outlets.

• For government to petition the Energy Regulatory Commission to increase discounts in electric bills of poor families.

• For the public works department to raise the number of out-of-school youths it employs to maintain and clean roads.

• For the Technical Education and Skills Development Authority (Tesda) to conduct a more comprehensive training course, especially on carpentry, to take advantage of the construction boom and the increased economic activity in the Middle East which will result from the increased demand on oil.

• Increase microfinance loans to generate more jobs and livelihood.

• Open more outlets of Botika ng Barangay and Botika ng Bayan and distribute more PhilHealth cards to the poor.

Sen. Mar Roxas said he would pursue his proposal to suspend the 12 percent expanded value-added tax on oil to help the people cope with rising oil prices.

"Reduction in oil tariffs as pegged to the price of crude in the world market is an example of token-ism or `pakitang-tao’ because it yields only a small relief to people’s wallets," he said.

Based on Roxas’ estimate, the EVAT suspension would bring relief to the public especially to motorists and other oil-dependent sectors in the form of at least P4 per liter reduction in pump prices of oil products.

He said another P6 would be saved for every 11-kilogram cylinder of liquefied petroleum gas or cooking gas.

Roxas said he has requested Sen. Francis Escudero, chairman of the Senate ways and means committee, to schedule his proposed bill for a public hearing "where all sectors and views about this issue will be welcomed."

Roxas’ Senate Bill 1962 seeks to suspend the EVAT on oil for at least six months to temper the soaring prices of gasoline and other petroleum products.

But finance and even Palace officials are lukewarm to the idea.

Roxas said he disagreed with the President’s economic team’s stand that a moratorium on the EVAT on oil would result in a weaker peso, less government services, and a bigger budget deficit.

He said ordinary consumers would directly benefit from the temporary scrapping of the EVAT on oil, and government would still be able to collect taxes because the people will use savings to buy other products and goods that also carry EVAT.

Roxas also said government should decide which goals to prioritize, whether it should preserve the "macho goal" of preserving a balanced budget or bringing economic relief to the people. – With Max Estayo and Dennis Gadil