Diesel tax hike: Logistics companies lament higher business costs, lack of viable alternatives
Some business owners said that the diesel tax hike will increase their operating cost, while others said that there are few options for commercial vehicles apart from those that run on diesel.
SINGAPORE — Several logistics companies said that they will be hit hard by the diesel tax hike, given the lack of practical alternatives for their commercial vehicles.
Some business owners said that the tax hike will increase their operating cost, while others pointed out that there are few non-diesel vehicles in the market.
Finance Minister Heng Swee Keat announced on Monday (Feb 18) that diesel tax is raised from 10 cents to 20 cents a litre with immediate effect, in a move to discourage the use of diesel vehicles because the exhaust is highly pollutive.
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Mr Sebastian Lee, managing director of logistics company SB Express, estimates that his company’s costs would probably go up by more than S$10,000 a month. The company has a fleet of 36 lorries and more than 10 vans.
He also said that passing on the costs to his customers by raising his rates might lead them to switch to other vendors.
“If (we) increase (prices), die. Don’t increase, also die. I don’t know what else we can do,” he said.
Changing his whole fleet to petrol-run vehicles is also not an option, because the losses incurred would be greater.
“There is no way out of this,” Mr Lee lamented.
Mr Henry Ong, managing director of Channel Management Systems, said that the lack of alternatives for commercial vehicles besides those that run on diesel is another issue.
A check on the e-commerce site for vehicles, sgCarMart, shows that a Nissan NV200 panel van with an automatic transmission and that runs on petrol costs S$65,000. This has an annual depreciation of S$8,100. The diesel version, which comes with manual transmission, costs S$63,000 and its annual depreciation is S$7,300.
Fuel cost, based on 10 full-tank top-ups a month, works out to about S$1,205 for the petrol van and S$1,045 for the diesel version.
In any case, the petrol-powered vans available in the market are too small to be suitable for a logistics company, Mr Ong said.
“It’s not that I want to buy diesel vans to pollute the environment. When the Government increases tax like this without giving me a solution, what do you want me to do?”
With about 10 vans and five motorcycles that all run on diesel, he estimates that his fuel costs would go up by about S$1,000 a month.
Finance Minister Heng said on Monday that commercial diesel vehicles would not need to pay road tax for a year, and there will also be a partial rebate for another two years to help businesses adjust.
But Mr Lee of SB Express does not think this amounts to much. “The free road tax is just one year, but the tax hike is forever.”
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CONSTRUCTION COMPANIES ALSO HIT
Construction firms also said that they are not spared from the hike.
Mr Kenneth Loo, executive director of Straits Construction, said that building projects involve the use of many diesel-powered vehicles for transportation.
“All the construction materials have to be transported to the building site. Even our workers, we have to transport them to the work site,” he said. His company constructs residential and commercial buildings.
Transportation aside, Mr Loo also pointed out that some equipment used on construction sites, such as temporary power generators and cranes, are also powered by diesel.
On the other hand, Mr Akbar Kader, managing director of Nan Quan Construction, a company that builds mainly residential landed properties, said that the impact of the tax hike might not be “very significant”.
This is because diesel costs make up only a small percentage of total construction costs, he explained.
However, he added that with margins “already very low” for construction companies, any increase “is a bite at the margin”.
“The diesel tax is not a one-time thing. It’s daily. You need diesel for transport, to make machines work. It’s a daily cost, so the impact is there,” Mr Akbar added.
EARLIER NOTICE PREFERRED
The president of the Association of Small and Medium-sized Enterprises (Asme), Mr Kurt Wee, called on the Government to give an 18-month lead time before implementing any new legislation that would impact business costs.
“You legislate a 10-cent increase in diesel tax. But at the same time, you know there are various government agencies with contracts handled by SMEs... It doesn’t feel right,” he said.
Mr Loo of Straits Construction agreed that an early notice would have softened the blow for construction companies, as they can factor this in when bidding for contracts.
This is especially given that construction projects usually stretch over a few years, he added.
