China says to subsidise farmers as fuel prices rise

Beijing, Mar 26: China, which raised fuel prices for the first time in eight months on Sunday, promised subsidies to protect some of the poorest sections of the population from higher costs, but gave no details of how it would distribute them.

The energy policy-setting National Development and Reform Commission (NDRC) said ex-refinery gasoline prices would rise by 300 yuan (.4) per tonne and diesel by 200 yuan per tonne, effective immediately -- which confirmed a Reuters report citing industry sources on Saturday.

The NDRC also said retail gasoline prices would rise by 250 yuan per tonne and diesel by 150 yuan per tonne from Sunday, again confirming figures from industry sources.

Retail prices in Beijing, at the centre of government drives to improve energy efficiency and curb environmental degradation, would increase even more, with prices in the capital rising 460 yuan per tonne of gasoline and 340 yuan per tonne of diesel.

The difference was ''in order to make up the added cost for refining gasoline at the standard of Euro III'', the NDRC said.

Around Beijing, signboards at petrol stations had already been changed to reflect the new prices.

Prices of aviation fuel and fuel costs for military use will also rise.

The overall changes were below market expectations, and the statement did not mention a revamp of the price-setting system that had been expected to accompany the increase.

China's 1.3 billion people have been sheltered from the impact of soaring global energy costs, allowing oil use to grow unchecked and causing huge losses at state-owned refineries.

Subsidies

''In order to properly handle the impact of the continuing high international oil prices and the adjustment of the domestic oil price, the State Council decided to establish a mechanism to subsidise vulnerable groups and public service sectors,'' the NDRC said.

There were no details on the size of the subsidies, which would go to grain growers, fishermen, some fishing firms, state-owned forestry enterprises and urban public transportation firms.

The mechanism for how they would be offered would be worked out by the Ministry of Finance at a later date, the NDRC said.

For operators of passenger ships, the impact of the price rises would be reduced mainly by raising transportation charges.

Taxis in urban areas would also raise prices, it said. A report in the Beijing Youth Daily said the city would hold public hearings to discuss new taxi charges.

But taxi drivers said they were worried about the increase and sceptical of seeing any of the promised subsidies from their companies.

''If there is no pressure from the top, they will not care,'' said Wang Maosheng, a Beijing driver.

Their worries, likely to be echoed by China's hundreds of millions of poor, rural dwellers who rely on diesel to fuel tractors and other machinery, have made the government cautious about raising prices too high, fearing social instability.

At the same time, industry worries about vanishing margins contributed to fuel shortages last summer after refineres boosted more profitable exports at the expense of domestic supplies.

Reuters