The Environment & Ecology Bureau today said that to ensure the proper implementation of the diesel subsidy, the Government has been enforcing the “pay later” arrangement for reimbursing the price difference to oil companies in order to ensure the proper use of public funds.
The Government has, since April 30, been implementing the Diesel Subsidy Scheme, which runs for a period of two months, with a view to supporting public and commercial vehicles and vessels and related industries that use diesel as fuel.
Under the subsidy scheme, users who consume diesel locally may receive a subsidy of HK$3 per litre of diesel when they purchase diesel to reduce the selling price by HK$3 per litre accordingly.
Recently, there have been views suggesting that the increase in diesel prices is due to oil companies and distributors profiteering from the subsidy scheme by increasing prices in advance since the announcement of the subsidy scheme on April 10.
There are also claims that the pump price of diesel had already increased by almost HK$3 per litre within the intervening 20 days.
The Government emphasised that these claims do not correspond with the facts, and it is necessary for the Government to make clarifications to set the record straight.
Global prices
Firstly, the prices of fossil fuels have been rising around the world, as affected by the situation in the Middle East, and the price rises are by no means unique to Hong Kong. It is necessary to consider the broader picture and the situation in other regions instead of inferring that oil companies might increase their prices in advance to profiteer merely based on the fact that fuel prices are on the rise.
If compared with the position before the conflict in the Middle East, the international refined oil product price for diesel had increased by around HK$10 per litre at most, whilst the maximum increase of the local diesel pump price was HK$7.5. From mid-April to now, the international refined oil product price has increased by around HK$0.5 (+6.67%).
Over the same period, the maximum retail price of diesel in the Chinese Mainland had increased twice by a total of around HK$0.4 (+4.0%), while the local diesel pump prices had increased by HK$0.6 (+1.66%).
Furthermore, some oil companies have reduced their diesel retail pump prices as of today, but it is expected that the diesel price may fluctuate as affected by the conflict in the Middle East.
‘Pay later’ arrangement
Secondly, it is the Government’s responsibility to ensure the proper use of public funds. In designing the subsidy scheme, the Government has introduced multiple layers of safeguards to ensure that users will benefit from the subsidy.
Among the safeguards, the subsidy scheme has introduced a “pay later” arrangement, where oil companies and distributors must first sell subsidised diesel to consumers at a price reduced by HK$3 per litre, and specify the subsidy amount and the selling price on the receipts issued to their customers.
Oil companies and distributors must then submit a report to the Government one week later to apply for reimbursement of the amounts they have advanced.
The Government will then verify the reports, sales records and invoices submitted by the oil companies and distributors, and will only reimburse the price difference if the information provided is confirmed to be accurate.
Should there be issues arising, the Government reserves the right to refuse to reimburse the price difference, and to refer the case to law enforcement agencies for follow-up. Therefore, should oil companies attempt to profiteer, they will not be reimbursed the price difference they have advanced.
The operation of the subsidy scheme has been largely normal and smooth since its implementation. The Government is receiving weekly reports from the oil companies and distributors, and is conducting the necessary checks.
Audit report
Thirdly, upon the completion of the subsidy scheme, oil companies and distributors will need to submit to the Government an audited audit report, which will require them to state the comparison of the change in the average retail price after deducting all discounts, excluding the HK$3 per litre subsidy, with the corresponding import prices before and during the subsidy period.
Should there be changes in this ratio, these may suggest profiteering which can be easily detected by auditors. The Government may then use the audit report to take the necessary follow-up action with the oil companies and distributors.
The Government reiterated that it will spare no effort to implement the arrangements by gatekeeping to ensure that the subsidy scheme will benefit users who are affected by surging diesel prices.
