POSTSCRIPT / September 24, 2000 / Sunday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Estrada hurting, needs an excuse to end the war?

THE Estrada administration is not telling us the score on the war raging on Sulu island, so let’s cut through the shroud of secrecy and tell what we think is going on.

* * *

DON’T ever think that it is only the Abu Sayyaf that’s hurting and crying for an end to that costly war on Sulu.

Even the Estrada administration is now looking for an excuse to stop the war. We’re almost scraping the bottom of the barrel as we enter the last quarter of the fiscal year, and here is an unprogrammed war that is eating up at least P20 million a day!

Congress has been asked to rush an emergency P800 million to P1 billion to sustain the war, but the big question is where to get the extra money from scarce revenues without paralyzing the government.

* * *

THE only way to raise the money is to ask the cronies to surrender half of their take from sweetheart deals, for relatives to stop padding contracts, and for officials to reduce to 10 percent their usual commissions from projects and purchases.

But let Erap Estrada ask them to do that and he would have a bigger war on his hands.

If Erap is that desperate for more war funds, he could try dipping into his personal billions, or into his unaudited intelligence fund and his social fund skimmed from state-sponsored gambling.

* * *

LIKE the Erap administration aimlessly plodding on, the Sulu war is raging like a forest fire spreading erratically wherever the wind blows it.

It’s been a week now, and the war has not graduated from being a mere massive search and destroy campaign.

Instead of intelligence first pinpointing the enemy location and the combat team being sent to destroy it, our soldiers are dispatched to flush out the elusive quarry, hostages in tow, somewhere in the forested hills of the 160,000-hectare island.

The war is dragging, because our soldiers cannot fight the Abu Sayyaf until they find the group. And there are several splinters of the estimated 3,000-strong terrorist force to track down.

* * *

WHERE a grim Erap used to affirm he would not stop until he has reduced the Abu Sayyaf to ashes (abo), now he is saying he would suspend military operations if the terrorists released the remaining hostages, including an American from Oakland.

This suddenly conciliatory statement and his body language show that the erstwhile tough talking Command-in-Chief is now looking for an excuse to stop the war that is not being won by anybody, including the government.

Although he refuses to reveal the military timetable, Erap knows he is running out of time to catch at least Commander Robot and rescue all the hostages. If the fruitless military sorties drag on for another week, Erap could be in deep trouble.

More so when the world hears that Robot has again slipped through the vaunted military cordon thrown around Sulu and is not only sneering, but is now laughing all the way to the bank (in some neighboring country?).

* * *

WITH the government running low on funds, it is unlikely that Malacañang would prod Congress to reduce the specific or excise taxes on petroleum products. This despite clear signs that the prices of gasoline and other fuels would go up very soon.

The government actually grabs, by way of specific taxes, more than 10 times what the oil companies get from their products. The revenue from this tax amounted to some P30 billion last year.

Under RA 8184 (An Act Restructuring the Excise Tax on Petroleum Products), specific or excise tax on oil products is fixed per liter as follows: Extra low lead — P5.35; Regular gasoline — P4.80; Extra unleaded — P4.35; Jet fuel — P3.67; Diesel — P1.63; Kerosene – 60 centavos; and Fuel oil — 30 centavos.

The tax on diesel is comparatively low, and that of liquefied petroleum gas (LPG) is zero, because these fuels are politically sensitive.

The argument is that the government can shave by a few centavos the specific tax on some of the items to give temporary relief to consumers while other measures are explored to make prices more reasonable.

* * *

BEFORE excise taxes are slapped on refined products, a 3-percent duty is collected from imported crude oil. The levy, which amounted to P2 billion last year, is expected to grow by some 50 percent to about P3 billion this year as crude imports escalate.

The 3 percent is applied on the Cost of crude oil, Insurance and Freight costs (or CIF). This is the same rate of duty imposed on refined oil products being imported by new industry players.

The landed cost of refined products is lower than the prices of the same oil products of the local Big 3 refineries, demonstrating that importing fuel could mean lower retail prices if the climate conducive to their efficient marketing is in place.

* * *

THIS is the free, deregulated market situation that the National Oil Exchange (OilEx) seeks to establish under a bill filed by Bataan Rep. Enrique T. Garcia and some 180 other congressmen.

Like the new players but on a grander scale, the non-profit OilEx would bring in cheaper fuel by having refineries and traders worldwide, including the local Big 3, offer the lowest bid to supply the country’s total fuel requirements.

The OilEx will be lean. It will not be weighed down by the same overhead and the megaprofits of the giant oil firms. To ensure lowest pump prices possible, it would add to the landed cost only its minimal cost of operations.

Serving as a clearinghouse, the exchange will just oversee the collating of the national fuel requirements, the electronic bidding, and the administrative work of matching sources and buyers.

* * *

SEN. Francisco S. Tatad is right in saying that it is not proper to get part of the $627-million Marcos loot held in escrow with the Philippine National Bank or the funds intended for agrarian reform to pay the $150 million that the Marcoses owe martial law victims who had sued for damages.

The senator said the $150 million in damages awarded by a US federal court in Hawaii is a private obligation of the Marcoses that cannot be legally paid from public funds.

The Sandiganbayan has ordered the Marcos loot seized in favor of the government for being illegally acquired wealth. As such, under the law it goes entirely into the agrarian reform fund of the government.

* * *

TATAD made the observation after some quarters, including Malacañang, proposed the amendment of the agrarian reform code to allow part of the seized Marcos loot to be shared by torture victims.

The mechanics for dipping into the agrarian fund is complicated, because when seized illegal wealth is included in the agrarian reform fund, it loses its identity as formerly Marcos money. And martial law torture has nothing to do with agrarian reform.

Tatad suggested that the Hawaii court look for other Marcos holdings in the United States that it can legally order to be paid to torture victims. The PNB escrow account that will soon disappear into the agrarian fund is beyond the reach of a US court, he said.

* * *

IN claiming huge losses and pointing out that even when they were making money, they were not making enough, the oil companies often refer to a supposed 12-percent return-on-rate-base (RORB) allowed them by law.

The problem with RORB is that it is net Income over Asset Base. One trick is to pad the value of the assets brought into the computation so as to make profits appear to be small. Sometimes, some utility firms even list down assets that have no direct bearing on their main business.

Referring to the same RORB question, reader Pete L. Ilagan said in an email: “Meralco’s reason for a 30 centavo-per-kilowatt-hour rate increase is quite alarming. According to Meralco, it fell short of its loan agreement with World Bank which stipulates a minimum 8-percent RORB. Now, it is this WB condition that is made to appear as the villain.”

* * *

ILAGAN continued: “The RORB formula is Net Income over the Asset Base. Net income is determined after deducting all of kinds expenses and can easily be lowered and manipulated by padding those deductions, i.e., charging more expenses. Conversely, the asset base can easily be bloated by adding or pumping in more assets that are not directly useful or used in providing electricity.

“A good part of Meralco’s asset base now claimed to be in the vicinity of P85 billion has been acquired from loans, principal of which comes from the World Bank.

“Since, as the RORB formula shows, it is this asset base on which Meralco’s equity owners derive a 12-percent return, Meralco’s customers are in effect paying the equity holders a return on an asset the acquisition of which the customers had themselves financed through the loans. We must bear in mind that payments on those loans are part of the operating costs that we pay for with our monthly electricity bills.

“We have been told that this is utility economics; but what about consumer economics?”

* * *

(First published in the Philippine STAR of September 24, 2000)

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