PDI’s Solita re: NAPOCOR and it’s unaudited P70B Profit
August 9, 2008
Napocor’s free ride
By Solita Collas-Monsod
Philippine Daily Inquirer
First Posted 04:19:00 08/09/2008
MANILA, Philippines—In its attempt to cushion the impact of the oil and food price crisis on the poor, the government has put together a package of subsidies, tax relief, and interest-free loans. We are talking here about such programs as the one-time P500 dole-out to the poorest electricity consumers (100 kilowatt-hours or less per month), the P5-billion Conditional Cash Transfer (CCT) Program, the P0.5-billion increase in the loans available to high school and college students, the loan fund set up to help transport operators switch from diesel to liquefied petroleum gas as fuel, the exemption from income taxes not only of minimum-wage earners but also those four-children families who earn up to P200,000 per year. And, of course, the subsidized rice from the National Food Authority (NFA).
What can be said about this package? Well, for one, it looks like the benefits will be redounding more to the non-poor than to the poor. The tax relief measures, for example, will benefit the bottom 50 percent of Filipino families to the tune of P950 million, even as it will benefit the top 50 percent to the tune of P15 billion. In fact, if you add together the amounts for the programs that are really targeted for the poor, i.e., the CCT, plus that unfortunate one-time dole-out, plus the tax benefits for the minimum-wage earners, the total will come out to only around P8 billion. And even if you include the loan funds, the grand total will still amount to P9 billion—or only 60 percent of the benefits the non-poor stand to receive from the tax relief bill.
The reader may be wondering why I didn’t include the cost of subsidizing the NFA rice. Well, that is because there is doubt as to how much of that rice actually goes to the poor—a doubt held even by the Department of Social Welfare and Development (DSWD), which, according to news reports, has been complaining to the NFA about the matter.
But what is unfortunate—no, that is too tame a word—what is disgraceful, is that even if the subsidy for the NFA rice reaches P15 billion this year, and even if we assume that it will wholly benefit the poor, the total amount spent on alleviating their burden—P24 billion (P15 billion plus the P9 billion estimated above)— will still be less than the P27 billion that National Power Corp. (Napocor) has essentially forced the national government to go without because it has to pay for Napocor’s contractual obligations for its purchases of natural gas.
Why should Napocor, which has been granted hefty rate increases, pass on to the national government part of its operating costs? And why is the public not aware of this? I myself found this out quite by accident. I had been informed by petroleum industry sources that for the first six months of this year, the national government’s share of the Malampaya natural gas operations averaged $100 million a month—which at an exchange rate of P40 to $1 would yield P4 billion. Assuming no changes in the pricing pattern, this means a revenue of P48 billion a year—so naturally, I wanted to find out where it was going, since this could be considered part of government’s “windfall” from the rising oil prices, which it says it is using for the poor.
I called my sources in the finance department, and asked where the money was going, and they had no idea. They suggested I call up the Department of Energy, and there is where I got the information. I was informed (which I already knew) that from the net revenues of the Malampaya natural gas project, operated by a consortium consisting of Shell, Chevron, and Philippine National Oil Company, the Philippine government received 60 percent and the consortium received 40 percent. The amounts involved were small until sometime last year, because before any sharing took place, 70 percent of the revenues would be used to pay for the investment costs, and only the remaining 30 percent would be shared between the government and the consortium. By late last year, however, most of the costs of the project had already been recovered, so naturally the amounts the government was receiving would rise from 18 percent of revenues (60 percent of 30 percent) to 60 percent.
But where did the money go? Well, a part went directly to the Bureau of Internal Revenue, because the agreement calls for government to pay the income taxes of the operation. But only 40 percent of what the government should have gotten was actually remitted—that amount earmarked for local governments. The remainder was kept by the consortium, as payment for Napocor’s take-or-pay contract with it. By agreement, the government was to be the consortium’s bill collector.
And so, since 2002, when the Malampaya project started operating, the government has paid for P27 billion of Napocor’s operating costs—with the Department of Energy (DoE) having the burden of trying to collect the amount from Napocor. And failing miserably.
There are questions about why some local government should get a share of the government revenues, but that is beside the point at the moment. What is relevant is that unbeknownst to all of us, the Napocor has been taking a free ride on the people’s money, despite the rate increases that it has been granted. Worse, it will continue to do so in the future, because the DoE is either unwilling or unable to collect from it. My impression is that the DoE sends regularly letters of reminder to the Napocor to pay what it owes, and the Napocor completely ignores these—in spite of the fact that in 2006, Napocor’s (unaudited) income statement showed a profit of P70 billion.
The poor get screwed coming and going.