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Gov’t to Spend 10 Trillion Won to Counter Record Oil Prices

Gov’t to Spend 10 Trillion Won to Counter Record Oil Prices

Posted June. 09, 2008 08:28,   


To help struggling petrol users amidst continuing oil price hikes, the government decided to provide a one-year package of tax rebates and subsidies to 13.8 million workers and self-employed businessmen starting next month. The amount of direct cash compensation is expected to be limited to 240,000 won per head, or 3.14 trillion won in total.

Drivers of buses, trucks or coastal cargo ships, farmers, fishermen and owners of cargo trucks of 1 ton or smaller will be also subject to government subsidies amounting to half of the recent oil price increase.

The relief is part of the comprehensive measures to overcome high oil prices, drafted by the high-level conference between the government and the ruling Grand National Party held on Sunday morning at the prime minister’s residence. The tax rebates, first of their kind in the nation, apply indiscriminately even to the class without income.

Workers whose annual income (as of last year) is less than 36 million won will be classified into four categories by their income level and get paid accordingly from 60,000 won to 240,000 won starting July 1. Some 78 percent of the total workers, or 9.8 million out of 13 million, will benefit from the measure.

Among 4.6 million self-employed businessmen, 4 million people with an annual income of 240 million won or less (as of last year) are also subject to the same amount of tax rebates.

For transportation businesses, the government will compensate for 50 percent of the diesel price increase (when the standard price is 1,800 won per liter) in addition to the current oil price subsidy program. The subsidy will benefit 49,000 buses, 337,000 cargo trucks and 2,000 coastal cargo ships.

Farmers and fishermen will also receive half the additional diesel prices over 1,800 won per liter. Those with severe physical disabilities among basic livelihood security recipients or the likes will be paid 20,000 won in monthly oil subsidies.

Owners of cargo trucks of 1 ton or smaller will be able to enjoy the same amount of discount in fuel prices with owners of small vehicles, as they can purchase gas and diesel at 300 won-less prices per liter, and liquefied petroleum gas at 147 won-less prices per liter within the annual cap of 100,000 won.

Mid to long-term measures include encouraging more competition and a better distribution system in the oil product market. To help public transportation users, the conference also decided to extend the current bus fare discount system for transfer passengers to red-colored inter-city buses connecting suburban residential areas with downtown Seoul starting the fourth quarter this year.

The measures will require about 10.5 trillion won of budget. The government plans to use unused tax revenues of 4.9 trillion won from last year and a surplus expected over the next year.

Minister of Strategy and Planning Kang Man-soo said the government will take further measures, such as lowering oil taxes if the Dubai crude prices surpass $170 per barrel.

higgledy@donga.com parky@donga.com