Diesel fuel subsidized

Oil importers call government to cut VAT on ‘Green diesel’ too

The Cabinet has decided to cancel the value-added tax on diesel fuel (red diesel). It said that in the meantime it will apply a temporary subsidy of two dollars to the price of each tank (20 liters) of diesel fuel.

The price of a diesel tank is currently LL30,300 (around $20.25).
The subsidy will be paid through a treasury credit of LL22.5 billion ($15 million) transferred to the Ministry of Energy and Water (MoEW).

The subsidy will be suspended once the ten percent VAT removal is approved by Parliament. The Cabinet stipulated that the subsidy shall not be applicable for more than one month (starting December 19).

Oil importing companies have criticized the subsidy decision, which excluded green diesel.

Gas oil is exclusively imported into the country through the two state-owned oil facilities in Zahrani and Tripoli. Green diesel is imported through private companies.

Diesel fuel, referred to as ‘red diesel’, is mainly used for heating houses, but could be used to operate generators and machinery. Green diesel is a form of diesel fuel with substantially lowered sulfur contents, which makes it less polluting. It is generally used for generators, machinery, and vehicles.

The Association of Petroleum Importing Companies has called on the government to subsidize both types of fuel oil, and to allow them to import red diesel.

The Managing Director of HYPCO (Hydrocarbon Products Company), Joseph Geagea, said that sales of green diesel account for 20 to 35 percent of the total sales of oil importing companies. Geagea said that if the VAT was cut from red diesel alone, the price difference between the two products would negatively impact the output of oil importers.

Oil importing companies also expressed concern that cutting the VAT on red diesel alone would allow “some unethical traders to deceive consumers.”

“People usually cannot differentiate between the two types of diesel because the actual color of green diesel is orange,” Geagea said. He said that customers intending to buy green diesel could be sold the subsidized red diesel instead.

Geagea said that it is also common for the two types of fuel to be mixed together and then sold illegally as green fuel.