JGS Petrochem seeks clarification on tariff cover from Government

29-Aug-05

A decision of the Cabinet-level Tariff and Related Matters (TRM) committee has upheld an earlier decision to lower tariffs on 11 petrochemical items to 5% from 7-10%. Since the tariff cover was an important factor for .JG Summit Petrochemical Corp. (JGSPC) to make its proposed P26.25 bln naphtha cracker plant a viable project, the company is seeking clarification on the government's decision. The Gokongwei-owned 350,000 metric ton capacity proposed naphtha cracker plant is estimated to be operational by 2008 The reason for tariff reduction is the impact of higher tariffs on the downstream petrochemical players and the consumers who are going to be burdened with higher cost of products. The Philippine Plastics Products Association said the tariff differential between finished and raw plastics materials had forced the downstream petrochemical industry to downsize its operations leading to 20,000 jobs lost. The Cabinet-TRM has recommended this to the National Economic and Development Authority Board for the issuance of an Executive Order by the President, in all probability in the next Congressional break. JGSPC, meanwhile, has opened the bids from 3 Asian firms for the contract to build the cracker plant near its existing polyethylene and polypropylene plants in Batangas. Part of the project's financing will be sourced from the country of the winning bidder. Of the total project cost, the Gokongwei Group is willing to put up 30% equity. With the huge cost of putting up the country's first naphtha cracker plant, JGSPC has stressed the need for tariff protection. The Cabinet TRM maintains that a post operative tariff protection would be granted once the JGSPC project goes on stream.