Impact of the increase in Fuel taxes in Papua New Guinea
The Independent Consumer and Competition Commission (‘ICCC’) has come out to clarify its regulatory oversight over fuel prices in the country, given the new tax for fuel recently introduced in the 2018 National Budget.
ICCC Commissioner and CEO Paulus Ain said: “Currently, the ICCC is only mandated to monitor the prices for Petrol, Diesel, Kerosene and Jet Fuel [petroleum products]. These petroleum products have been declared by the Minister for Treasury as “declared services” for the purpose of the Price Regulation Act.”
Under the Napa Napa Project Agreement between the Government and InterOil (now Puma Energy), it is a requirement that Import Parity Pricing (‘IPP’) must be used for setting retail prices for petroleum products in PNG. As per the Project Agreement, the IPP is the pricing formula that sets the benchmark prices for all refined petroleum products produced at the Napa Napa Refinery as if those products were imported from Singapore.
“Singapore’s refined product prices are the benchmark prices observed by all countries in the AsiaPacific Region, including PNG. The ICCC is not a party to the Project Agreement, hence; it has no say over the pricing arrangements for refined fuel products from Napa Napa. However, the ICCC only monitors and verifies the IPP to ensure that it is in compliance with the Project Agreement.”
Mr. Ain added that in light of the fuel tax changes by the Government, the IPP will not be affected but the overall retail price or the IRP will increase.
“The Government has approved for an increase in the excise duty for diesel from 10 toea per litre to 23 toea per litre, which will come into effective from 1st January, 2018. Due to the increase in excise, Government taxes [excise duty and GST] on diesel will account for 17.8% of the final retail price for diesel in 2018, which is an increase from 13.1% in 2017.”
According to ICCC’s calculation, the increase in excise duty for diesel alone from 10 to 23 toea per litre will increase the final retail prices for diesel by approximately 5.75% in 2018.
Mr. Ain said the new import duties of 10 toea per litre for both diesel and petrol will not be reflected in the final retail prices because they are not part of the IPP formula, which was agreed upon between InterOil (now Puma Energy) and the Government in the Project Agreement.
“Fuel importers will have to absorb the import duties in their margins. Therefore to avoid paying the import duty, fuel importers are encouraged to source fuel from Puma’s Napa Napa Fuel Refinery.”
The increase in the excise duty will likely have a cumulative effect on general inflation in 2018. Prices of goods and services will likely increase in 2018 as transport costs, amongst other costs, of providing these goods and services are likely to increase due to increase in fuel costs.
Mr. Ain said that as a responsible regulator, the Commission is urging all Papua New Guineas to prepare for these new changes by the Government, and cut back on wasteful spending.
“The ICCC has no control over the introduction of new fuel taxes. This is the prerogative of the Government of PNG.”
ICCC proposes to allow Air Niugini to continue partnering with Air Vanuatu and Solomon Airlines
The Independent Consumer and Competition Commission (“ICCC”) proposes to allow Air Niugini to continue to partner with Air Vanuatu and Solomon Airlines in their respective code-sharing arrangements for a further period of three years. The code-share services will be provided under flights operated by Air Niugini.
The code-share arrangement with Air Vanuatu will be on the Port Moresby-Port Vila route via Honiara. The code-share arrangement with Solomon Airlines will be on the Port Moresby-Honiara route.
Commissioner and Chief Executive Officer, Mr. Paulus Ain said whilst both code-share agreements raise competition concerns, they are likely to continue to bring more benefits to the players in the aviation industry and contribute to the growth of economic activities associated with the aviation industry.
Mr. Ain added that the ICCC’s assessment concludes that these code-share arraignments will result in some of the following benefits to the traveling public:
Potential growth in economic activities as a result of increasing traffic volume (from Asia and the Pacific) and making Port Moresby as a hub to the Pacific for Asian travelers and as a hub to the Asian destinations for Pacific travellers;
Foster the development and growth of the route in terms of traffic volume for Port Moresby in the long run;
Increase traveller’s choice of marketing airlines;
Increase frequency of services and connection to and from Asian destinations; and
Encourage independent entry of competing airlines, after growth in their respective market shares, in the long run.
“To minimize the anti-competitive effects of the agreements, the ICCC proposes to impose some conditions to control the behavior of the parties.” Mr. Ain said.
“Any interested business or general public who would like to comment or provide their views on the Draft Determination must do so before 26th January 2018.”
ICCC to recommence the review of KCHL’s authorization application for the proposed merger of Telikom PNG Ltd and PNG DataCo Ltd
The Independent Consumer and Competition Commission (ICCC) would like to inform industry stakeholders and the general public that Kumul Consolidated Holdings Limited (KCHL) has advised the ICCC to recommence the assessment of the application for authorization for the proposed merger of Telikom PNG Limited (Telikom) and PNG DataCo Limited (DataCo).
ICCC Commissioner and Chief Executive Officer, Mr. Paulus Ain said that the review of the Authorization application was put on hold due to the withdrawal of the Clearance application for the proposed merger in August 2017 and that KCHL, as the applicant, exercised its rights under the ICCC Act to withdraw the Clearance application.
KCHL, however, has recently asked the ICCC to recommence the assessment of its Authorization application. Therefore, the ICCC now advises relevant stakeholders and the general public that it has recommenced the assessment of the Authorization application.
Commissioner Ain, said, “We welcome the request by KCHL for ICCC to recommence the review of the pending Authorization application.”
He added that ICCC will work with KCHL and other relevant stakeholders to expedite the assessment of the application and give a decision within the number of days required under the ICCC Act.