For the development of domestic refining will pay car owners on gas.
The Parliament may increase the excise duty for most popular automotive fuel in Ukraine – gas if you decrease the same rate for gasoline. In the case of the initiative, the ratio of the level of excise duty between petrol and LPG (liquefied petroleum gas) may be one of the highest in Europe, told UBR.ua analyst consulting group A-95 Artem Kuyun. Such a decision would increase the cost of filling with gas 2.8 UAH. calculated experts enkorr, resulting in the current two-time benefits relative to gasoline will disappear. Despite the fact that the initiative is not even considered in BP’s tax Committee, for its implementation there are pretty good chances, experts say.
LPG – brake domestic refining
In connection with decrease in level of incomes of the population, Ukraine is among the five world leaders in the consumption of liquefied petroleum gas in automotive sector. The price of propane-butane stimulated drivers to install expensive gas equipment in the hope of saving on fuel in the future. In 2016 Ukraine went 9% of the world fleet of vehicles with LPG or 2.25 million cars. By August 2019, the market volume of autogas was equal to petrol.
The drop in sales of petrol all the time does not coincide with the plans of the major domestic producers of petroleum products. For example, the company “Ukrtatnafta” and its the largest in Ukraine Kremenchug oil refining factory, even with a decrease in production capacity in previous years have advocated the need to restore balance in the domestic market.
The main argument used was the inability to meet the increasing demand for LPG through its own resources and, as a consequence, the growing dependence on Russia in the energy sector.
“You recall over the last 10 years there was a shortage of gasoline, unlike liquefied natural gas?”, – stated his position in an interview with the head of “Ukrtatnafta” Pavel Ovcharenko, Recalling in particular that “Ukrtatnafta” has so far invested $1.2 billion to increase production of gasoline, which also means the impossibility to reduce its speed further.
For 2018 Kremenchug refinery produced around 2.2 million tons of petrol, while the capacity of the plant is capable of producing a much more respectable amount of fuel. However, to sell it “Ukrtatnafta” cost effective only in the domestic market, where, on the one hand strongly affected by the presence of imported fuel from Belarus, and on the other, reduced sales volumes due to the effect of LPG. So, for 7 years, the turnover of gasoline in Ukraine was reduced twice.
An additional problem was the production of diesel – it can be in large quantities to sell to farmers, but the feature of the refinery is that when building capacity one type of fuel it is impossible to do without increasing the production of another. In the end, having all of the resources for closure of a diesel shortage, Ukrainian producers can not use them due to the lack of demand for gasoline.
“In “Ukrtatnafta” substantiate their point of view the fact that under the existing supply contracts of oil with Azerbaijan, with the possibility to increase production by 2.5-3.5 times, there is no market where you could sell the fuel. To produce all the gasoline they can sell, you need to give a tax incentive to equalize the excise tax. Subsequently, the “Ukrtatnafta” will be able to produce more liquefied natural gas, and diesel fuel, replacing imported petroleum products. This, in turn, will affect prices to the downside, because it will be tougher competition,” explained UBR.ua Executive Director of UPK Group Alexander Kirimov.
The working group in the Parliament has not yet been created
As told UBR.ua Executive Director of the Ukrainian Association of liquefied natural gas (WSG) Oleg Shirokov initiative regarding the excise tariff was announced by the representatives of the “Ukrtatnafta at the meeting of the Verkhovna Rada Committee on matters of financial, customs and tax policies at the end of September – early October, during the presidency of Deputy head of the Committee Alexander Dubinsky. The meeting was devoted to the system of electronic administration of the excise tax.
“I made their arguments, and after talking with Dubinsky, who promised to establish a working group to discuss the question from all points of view until the end of October. However, while it has not been established”, – said Shirokov.
Director WASH also said that at the meeting of the Committee was voiced by some other figures than published on the website Enkorr 24 Oct. So, if the rate for LPG proposed is the same as that according to Enkorr – 136 Euro per thousand liters, for gasoline, the reduction of the rate was offered much more – with the current Euro 213 to 170. Data source Enkorr announce plans to lower tariff bar to the level of 200 Euro per thousand liters.
The assistant to the head of the Committee on the financial, tax and customs policy Daniel Getmantsev, responding to a request for information UBR.ua noted that as of October 25, specific proposals to change the calculation of excise duties for fuel, the Committee has not been received.
Even high taxes can give “Ukrtatnafta” desired result
The introduction of tax edits the legislators there are pretty good chances, as this decision is favorable to the two largest manufacturers of gasoline – in addition to the “Ukrtatnafta”, said Alexander Kirimov, this state of the company. However, rising interest rates may not justify hopes of the company-owner of the Kremenchug refinery, as when the slowdown in the growth of the market, its significant reduction is not necessary to predict, says Artem Kuyun.
“If people have already switched to LPG, it will not go back, because, first, it has already spent on LPG, and secondly, even if 20 hryvnia for propane-butane in the retail price will be cheaper than gasoline,” – says Oleg Shirokov, adding that the “final” transition from petrol to gas is also confirmed by European statistics.
Will not have a positive effect on innovation and on the budget revenues, which, contrary to the estimates for the increase of revenues from excise duty on propane-butane will only maintain the status quo.
“The logic of this tax maneuver unclear because the budget from the reduction of excise tax on gasoline will get less on this article, and by reducing gas consumption would be plus or minus as much as with a high consumption but a lower excise duties”, – said the analyst of the consulting group A-95. The expert believes that a fee increase in itself would not be a negative factor – the question is rather in its parameters.
“Initially it was planned to raise the excise tax from 52 to 78 per 1,000 litres. I think that it would be a normal pace, as people continued to save, but there would be some balance. Personal car – not a necessity, the fuel in the world is indeed subject to excise duties, and the state should earn at the expense of people who don’t want to ride public transport. So, again, such reasonable dynamics would be justified and would be consistent with European practice. But the promotion that was offered last time, this is normal,” – says Kuiun.
The LPG market will slow development, but the outflow of gasoline is not going to happen
It should be noted that the payback of switching to LPG for cars with a gasoline engine is possible if the price of the petrol, not exceeding 50% of the cost of gasoline A-95. The proposed increase in excise tax rates eliminate this optimal ratio, says Artem Kuyun.
“The price of A-95 is around RS 27. with the many discounts, and the liquefied gas 13. In the case of the implementation of the proposed initiative, the gasoline will drop to 26 UAH. and LPG will increase to 15”, – calculated the expert.
Alexander Kirimov, in turn, noted that it is necessary to consider not only the price of fuel on the stele AZS.
“There is a coefficient of efficiency, which for LPG relative to gasoline is 1.15. In addition there is another caveat: the propane-butane underfilling more than light oil, as walking density. Given the above, and the envisaged reduction of the excise tax for gasoline that will cause a reduction of approximately UAH, the price difference between the fuels will decrease to 2-2,5 UAH. Percentage rate calculated by the experts very clearly that it was not uncompetitive skew. In the end, these two product become ravnokonechnymi”, – predicts the result of the tax changes Alexander Kirimov.
The loss of the economic effect on the transition to autogas, as already noted, slow positive dynamics in this segment of the market, but a significant reduction should not be expected on the basis of one factor – consumer features of the Ukrainian market.
“In developed countries people change car every 2-3 years, and, accordingly, the question of the choice of fuel appears at the same time. We have it every 6-7 years. In the long term it may help to change the situation, but again, the people who change the car, choosing between diesel and gas. Will fall off the prospect of gas – will mean diesel,” – said Artem Kuyun.
According to the expert, “Ukrtatnafta” still could compete for existing demand for the petrol market without resorting to tax changes.
“Share “Ukrtatnafta” is far from the one she could take, but in order to build it, you need to change the sales policy. Why this happens, and the consumer chooses the imported product, I don’t know. Can affect everything: price, conditions, reputation of the seller”, – shares the opinion of the expert.
A similar position in relation to the aforesaid issues in conversation with UBR.ua was expressed by Executive Director WASH Oleg Shirokov.
“Why, when excise equal conditions for foreign and Ukrainian fuel Ukrainian network buy gasoline in the Baltic States and Belarus? Just gasoline “Ukrtatnafta” uncompetitive that even if the General excise tax from gasoline to remove, anyway to buy will be imported because it is cheaper. And to improve the performance of the Kremenchug refinery due to the curtailment of the market for LPG, which practically saved the Ukrainian economy and the consumer is unacceptable. WASH Strongly against such breaking of the market. Excise policy should be based on the financial condition of the country, household incomes, pensions. In addition, there is a corresponding EU Directive under offer 200396, which Ukraine is obliged to implement”, – emphasizes Oleg Shirokov.
The reallocation of the excise duty can also affect the proposed “Ukrnafta” price in the direction of reduce the cost, to share with UBR.ua Alexander Kirimov.
“To compete with foreign providers due to more favorable prices. If they can sell more gasoline in the domestic market, then the Economics of reprocessing, they will be completely different. Cost recycled tons of oil will be reduced, respectively, will be reduced and the cost of petroleum products. But for this you need a free demand, which, due to the growth of the LPG market, no,” – results one more argument Kerimov.
Shortage of LPG can be avoided
Do not accept experts the fears of the representatives of “Ukrtatnafta” on the confluence of the dependence on supplies of Russian LPG. So, Artem Kuyun noted that despite the previous history of the shortage of propane-butane, all 2019 Ukraine was in surplus.
“Of course, is to minimize the risks is rational. Very much on the entire market is affected by the Russia – we can’t do without her to cope with diesel and gasoline. But at the same time, it is only one factor, and probably on the state level would need to think about how to diversify the supply – build ports to develop port infrastructure and not to limit proposals to one of the fuels. For example, Turkey imported LPG from the States, which can be even cheaper than the Russian purchase fuel on international bases in Antwerp, Amsterdam, Rotterdam, but in Ukraine not so the technical ability to do this – no special ports”, – explains the analyst of A-95.