LPG prices will rise in steps until 2006

Starting July next year, the price of liquefied petroleum gas(LPG) for non-passenger vehicles will be raised from 337 won per liter to 409 won, an increase of 21.3%, and the price of diesel oil will be increased from 604 won to 663 won per liter, an increase of 9.8%.

The Ministry of Finance and Economy, along with high-ranking officials of the ruling Millennium Democratic Party, held a policy revision meeting on the afternoon of September 7 and decided on the revision of tax policy for oil products, which would gradually increase the prices of LPG and diesel over a six-year period starting next year.

Accordingly, the LPG price, which is currently about 26% of the consumer gasoline price, gradually will increase starting next year and by July 2006, it is expected to be about 60% of the gasoline price. The tax on diesel will be raised in order to bring the diesel price to 75% of the gasoline price by 2006 from the current ratio of 47%.

With the assumption that should the consumer gasoline price be fixed at 1,279 won per liter, by 2006, LPG and diesel prices are expected to increase to 767 and 959 won per liter respectively.

The ruling party also has decided on a compensation system for the handicapped and certain individuals who have received national honors for the increase of the LPG price by providing them with LPG discount cards, which would enable them to purchase LPG at the current price.

Along with the revision of the gasoline tax, the taxation for interest and dividend earnings for deposits and investment funds at the agricultural, fishery bank, credit union and community credit cooperative will impose a low 2% tax for a three-year period starting next year, to 5% in 2004 and 10% in 2005. The current tax increase schedule is a delayed increase from the MDP`s original tax policy scheme, which proposed a 5% tax imposition next year and 10% by 2002.

Yun Seung-Mo ysmo@donga.com