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Logo of Phnom Penh Post newspaper Phnom Penh Post - Govt loses millions trying to curb gasoline prices

Govt loses millions trying to curb gasoline prices



A vendor fills a motorbike with gasoline in Phnom Penh – an increasingly costly activity but one that could have been even more expensive this year had the government raised taxes on fuel importers as global oil prices rose to record highs.

With gasoline hovering around record highs of 5,000 riels per liter, Prime Minister Hun Sen said the government has struggled to curb pump prices, losing tens of millions of dollars in a bid to keep fuel costs affordable.

Speaking April 23 at the Government-Private Sector Forum, Hun Sen said $240 million in potential tax revenue had been lost since the beginning of 2007, when the government decided not to raise the per-liter tax on fuel importers to keep pace with spiraling world oil prices.

“This factor is behind the less sharp rise of gasoline prices in Cambodia compared to neighboring countries and the price of oil on the international market,” Hun Sen told several hundred Cambodian and international participants at the forum.

Despite global oil trading at all-time highs – prices struck over $119 in late April – Cambodia has kept its tax on fuel at between 1,700 and 2,000 riels per liter, according to officials.

This, however, has not prevented a spike in fuel costs – including cooking gas – that has hit hard in Cambodia, where more than a third of the country’s 14 million people are mired in poverty.

The high prices have also encouraged smuggling from outside of the country, further adding to the burden on consumers, said Yim Sovann, chairman of the National Assembly’s Commission on Home Affairs, National Defense, Investigation and Anti-Corruption.

“This seriously affects the livelihoods of civil servants and workers who earn small incomes,” Sovann told the Post on April 28.

“Their income and their expenses are not balanced.”

Prok Yan, a 53 year-old rice farmer in Kampong Chhnang province, said the diesel fuel he is using to run his irrigation pump is now four times as expensive as the dry season rice he is growing.

“If I sell four kilograms of paddy rice, then I can buy one liter of diesel,” he said. “What’s the point? I’m not happy with the price of oil at the moment as it is rising like it will never stop.”

The discovery of offshore oil by the US energy giant Chevron has raised hopes that domestic petroleum production could insulate Cambodia from rising world fuel prices, according to Men Den of the Cambodian National Petroleum Authority.

But with production not expected to start until 2011 at the earliest, Cambodians are going to have to weather out the current inflationary storm that has spread to other consumer goods like food, said Kang Chan Dararot, president of the Cambodian Institute of Development Study.

“People see no solution which could curb the rising price of gasoline,” Dararot said.

“It not only affects farmers but also local and international investors.”



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