LC Paper No. CB(1)884/98-99
(These minutes have been
seen by the Administration)

Ref: CB1/PL/ES/1

Legislative Council
Panel on Economic Services

Minutes of meeting held on
Monday, 23 November 1998, at 10:30 am
in the Chamber of the Legislative Council Building

Members present :

Hon James TIEN Pei-chun, JP (Chairman)
Hon Fred LI Wah-ming (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon LEE Wing-tat
Hon CHEUNG Man-kwong
Hon Ambrose CHEUNG Wing-sum, JP
Hon HUI Cheung-ching
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon SIN Chung-kai
Hon Howard YOUNG, JP
Hon LAU Chin-shek, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon FUNG Chi-kin

Members attending :

Hon LEE Kai-ming, JP
Hon Mrs Selina CHOW LIANG Shuk-yee, JP

Members absent :

Hon David CHU Yu-lin
Hon Martin LEE Chu-ming, SC, JP
Hon Eric LI Ka-cheung, JP
Dr Hon David LI Kwok-po, JP
Hon MA Fung-kwok
Hon Christine LOH
Hon Bernard CHAN
Dr Hon Philip WONG Yu-hong
Hon WONG Yung-kan
Hon Andrew CHENG Kar-foo

Public officers attending :

For Agenda Item IV

Mr Stephen IP, JP
Secretary for Economic Services

Mr KWAN Wing-wah
Deputy Secretary for Economic Services

Principal Assistant Secretary for Economic Services
(Financial Monitoring)

For Agenda Item V

Mr Stephen IP, JP
Secretary for Economic Services

Mr Richard YUEN
Deputy Secretary for Economic Services

Ms Reddy NG
Senior Economist (Port and Maritime Board)

For Agenda Item VI

Mr Stephen IP, JP
Secretary for Economic Services

Mr KWAN Wing-wah
Deputy Secretary for Economic Services

Principal Assistant Secretary for Economic Services

For Agenda Item VII

Mr Stephen IP, JP
Secretary for Economic Services

Mr KWAN Wing-wah
Deputy Secretary for Economic Services

Principal Assistant Secretary for Economic Services

Regulatory Services Controller,
Electrical and Mechanical Services Department

Mr Stephen CHAN
Chief Engineer/Electricity Legislation Division
Electrical and Mechanical Services Department

Attendance by invitation :

For Agenda Item IV

China Light & Power Co Ltd

General Manager

Dr Albert POON
Chief Planning Manager

Mrs Sandra MAK
Group Public Affairs Manager



For Agenda Item VI

Shell Hong Kong Limited

Mr Robert YOUNG
Director for Hong Kong and Macau

Mrs Irene HAO
Public Affairs Manager

Caltex Oil Hong Kong Limited

Mr Jack TO
Manager - Retail Business Unit (Hong Kong)

Ms Avon SIT
Public Relations Officer

Mobil Oil Hong Kong Limited

Mr Johnnie CHIA
General Manger & Vice President - Fuels

Mr Raymond WONG
Government Relations/Public Affairs Director

China Resources Petrochems (Group) Co Ltd

Mr ZHU Dan
Director, Vice President

Director, Vice President

Esso Hong Kong Limited

Mr CHAN Kah Cheong
Marketing and Public Affairs Manager

Mr Kelvin WONG
Retail Manager

Consumer Council

Chief Executive

Head, Trade Practices Division

Mr Alfred FUNG Chak-yan
Chief Trade Practices Officer

Clerk in attendance :

Mr Andy LAU
Chief Assistant Secretary (1)6

Staff in attendance :

Mr Daniel HUI
Senior Assistant Secretary (1)5

I Confirmation of minutes and matters arising
(LC Paper No. CB(1)500/98-99 - The minutes of the meeting held on 13 October 1998)

The minutes of the meeting held on 13 October 1998 were confirmed.

II Information paper issued since last meeting

(LC Paper No. CB(1)439/98-99-Submission from the Hong Kong Pigfarm Association

LC Paper No. CB(1)495/98-99-Hongkong Electric Co. Ltd's Tariff for 1999

LC Paper No. CB(1)502/98-99-Import and retail prices of major fuels from October 1996 to September 1998)

2. Members noted the information papers issued since last meeting.

III Items for discussion at the next meeting scheduled for 30 December 1998
(LC Paper No. CB(1)499/98-99(01 ) - List of outstanding items for discussion)

3. In view of the large number of outstanding items for discussion, members agreed that a special meeting of the Panel be held on 11 December 1998 at 8:30 am to discuss the following items :

  1. terminal handling charges;

  2. phase two development of the Cheung Sha Wan Wholesale Market Complex and the relocation of the fruit market in Yau Ma Tei to the complex; and

  3. second runway at the Hong Kong International Airport.

4. Members also agreed that outstanding issues related to electricity supply in Hong Kong be discussed at the Panel meeting scheduled for 30 December 1998. The Chairman said that he would discuss with the Deputy Chairman on the exact items to be included in the agenda and would inform members of the finalized agenda afterwards.

IV China Light and Power (CLP) Company Limited's electricity tariff
(LC Paper No. CB(1)435/98-99(03) - information paper provided by CLP)

Block Structure for Domestic Tariff

5. Mr P A LITTLEWOOD introduced the block structure for domestic tariff as set out in CLP's information paper.

6. Members expressed concern about the modification to the block structure for domestic tariff which had led to a situation where even low consumers could be charged at a higher per unit rate during the summer months when electricity consumption had reached the fourth level. Mr LEE Wing-tat suggested that the three-block tariff structure should be reinstated for domestic users and CLP should target its demand side management (DSM) at large commercial and industrial users rather than smaller domestic customers. Mr CHAN Kam-lam cast doubt on the assumption that the inverted four-block structure could encourage domestic customers to reduce electricity consumption and sought statistical data from CLP in supporting this assumption.

7. In response, Mr LITTLEWOOD advised that it would be difficult to provide data to prove that domestic customers had reduced electricity consumption because of the inverted block structure tariff design. However, for DSM measures to be effective, it would be important for customers to realize the effect of their consumption through price messages. CLP was currently collecting feedback from customers, legislators and the Government on the four-block tariff structure and would take their views into account in a review on CLP's tariff structure to be conducted before March 1999. CLP had concluded a DSM agreement with the Government and would soon announce measures which would target at both large customers as well as domestic consumers.

8. Mr Fred LI Wah-ming expressed regret over CLP's failure to provide details on its revised block structure for domestic tariffs to the Energy Advisory Committee and the Economic Service Bureau before its implementation in early 1998. He pointed out that with the addition of a tariff block at a higher per unit tariff, domestic consumers having a large number of family members would easily fall into the new fourth block during summer months and had to pay higher electricity tariff. Mr LITTLEWOOD acknowledged that CLP did not discuss in detail with the Government before it introduced the four-block structure for domestic tariffs in early 1998 because CLP thought that more people would benefit from a lower increase in tariff by sub-dividing a lower tariff block and that such a change was a matter of implementation details. Nevertheless, details of the revised block structure were published and announced to CLP's customers at the time they were implemented. He assured members that CLP would in future discuss with the Government before implementing any proposed changes to its tariff structure. He further advised that the benefits of the four-block tariff structure to consumers would be seen in the cooler months. CLP would take all relevant factors into consideration in reviewing the block tariff structure in early 1999. On the rationale for an inverted block tariff structure, he explained that while it was accepted that a certain level of electricity consumption was unavoidable, some electricity consumption was optional. The inverted block tariff structure was therefore intended to influence people's consumption choice and pattern.

9. Responding to Mr CHEUNG Man-kwong's suggestion that CLP should adopt a different tariff structure during summer. Mr LITTLEWOOD said that it was CLP's tariff policy, that there should be no cross-subsidy between different classes of customers, namely, domestic, industrial, commercial and government customers. The domestic tariff structure adopted by CLP was to apply a lower unit rate to smaller customers and in order to have a balanced revenue from domestic customers, the larger domestic customers would have to be charged at a higher rate. He also supplemented that 1998 was the hottest year for the whole world and that explained a particularly high electricity consumption for last summer. Nevertheless, he agreed to consider Mr CHEUNG's suggestion regarding a concessionary tariff for special education schools to enable such schools to be equipped with air-conditioning for students who had to wear tight-fit clothing for therapy purpose.

10. As to whether CLP would compensate customers who had paid higher tariff this year than what they should have paid if the tariff structure were not revised, Mr LITTLEWOOD advised that after discussions with the Government, CLP would soon announce measures to implement DSM plans which might include offering energy efficient electrical appliances at discounted prices. As regards electricity tariff collected by CLP, he explained that excessive tariff collected would go into CLP's Development Fund. The Fund would provide a buffer and mitigate future tariff increase pressures.

11. Responding to a question on the Administration's role in monitoring CLP's tariff structure, the Secretary for Economic Services (SES) said that in accordance with the Scheme of Control Agreement (SCA), the Administration monitored the basic electricity tariff levels charged by CLP but the block structures of electricity tariff were implementation details which could be determined by the company. He considered that CLP's willingness to consult the customers and legislators on its tariff structure was a positive approach to tackle dissenting views. He further advised that it was CLP's intention to observe the effect of the four-block tariff on domestic customers during the winter months and take such findings into account in its review. When CLP's proposal to revise its tariff structure was ready next year, the Administration would examine the proposal to ensure consumers' interests were protected.

Other matters

12. Mr Howard YOUNG pointed out that even though CLP offered discounts on electricity tariff during off-peak hours, few consumers could benefit because the qualifying quantity for bulk discount at off-peak hours was set too high. He enquired whether the qualifying quantity could be lowered so that more consumers, particularly commercial customers in the service sector, could benefit. Mr LITTLEWOOD confirmed that CLP did offer bulk discount at off-peak hours in order to encourage consumers to use electricity when the generating cost was lower. He realized that there were few large users making use of the discount at off-peak hours, particularly for the service sector. CLP would discuss with some large industrial and commercial users to explore measures which would facilitate them to make use of the discounts.

Bi-monthly billing arrangement

13. As regards whether CLP's bimonthly billing arrangement would make more families fall into the higher tariff block under the inverted block tariff structure, Mr LITTLEWOOD explained that the bimonthly billing was introduced mainly to save costs through reduced number of metre readers and reduced costs related to issuing bills to customers. Dr Albert POON supplemented that the bimonthly billing arrangement would not make families fall into the higher tariff block because the block limit had correspondingly been doubled. He said that in fact some larger customers would benefit under the bimonthly billing arrangement under certain circumstances.

14. On whether customers had any choice in relation to bimonthly billing, Mr LITTLEWOOD advised that if any customer preferred to receive an electricity bill every month, the customer should inform CLP and the company would make appropriate arrangements accordingly. In so doing, metres would still be read every two months but CLP would spread the billing into monthly intervals.

CLP's electricity tariff for 1999

15. Noting the recent announcement by CLP on freezing electricity tariff at the present level for 1999, members generally felt that CLP should go one step further by reducing electricity tariff. Some members pointed out that a reduction in electricity tariff should not have adverse impact on CLP's profit because money could be transferred out of CLP's Development Fund to top up the profit.

16. In response, Mr LITTLEWOOD advised that as far as tariff adjustment was concerned, CLP preferred to have a modest increase each year rather than large increases at irregular intervals. In previous years, CLP would wait until a full year's data were available before deciding on the tariff for the subsequent year. This year, some major commercial and industrial customers had expressed concerns about electricity tariff for 1999 in view of the difficult economic condition. CLP was aware of the aspirations of the society and had therefore advanced the decision on a tariff freeze for 1999 even though a full year's data were not yet available. Depending on the actual amount of tariff received, CLP might need to transfer funds out of the Development Fund in order to maintain a tariff freeze for 1999. Mr LITTLEWOOD stressed that CLP's decision of not increasing tariff next year was a fair response to the community's aspiration. Mrs Sandra MAK supplemented that part of the reason for the healthy growth in CLP's Development Fund in the past was the company's efforts in reducing operation and capital costs.

17. In concluding the discussion, the Chairman requested the Administration to take note of members' concerns and keep the Panel informed of the review conducted by CLP on the inverted block structure for domestic tariff and the progress of the DSM programme. Members agreed that the subject matters should be brought up for discussion at the Panel meeting scheduled for March 1999.Clerk

V Development and competitiveness of Hong Kong container port
(LC Paper No. CB(1)499/98-99(02) - information paper provided by the Administration)

18. The Deputy Secretary for Economic Services (DS/ES) introduced the Administration's information paper with the aid of a computer presentation.

(Post-meeting note : A copy of the Administration's presentation was circulated to members after the meeting vide LC Paper No. CB(1)527/98-99(03)).

19. Members expressed concern about the high terminal handling charges (THC) charged by shipping lines which were related to the high container handling tariffs charged by container terminal operators in Hong Kong, and enquired if the opening of the market in container handling operations would enhance competition and lower the container handling tariffs and hence the THC. DS/ES explained that there was no evidence of a monopoly in container terminal operations because there were four terminal operators at Kwai Chung container port. In addition, there were also mid-stream operators, some of whom were independent operators, to provide container handling services. He further advised that there was no significant increase in THC in the past two years and in fact taking into account inflation, there had been some reduction in real term of the container tariffs charged by terminal operators. SES supplemented that container handling tariffs in Hong Kong were high because, quite different from most countries, container terminals in Hong Kong were wholly owned and operated by private operators who received no Government subsidy. The shortage of land for container terminal development and high operating costs were also reasons leading to high container handling tariffs. He envisaged that competition in the container handling service sector would increase substantially when Container Terminal No.9, which had a handling capacity of 2.6 million twenty-foot equivalent units (TEU), came into operation.

20. The Chairman enquired if the Administration would consider granting land to terminal operators at a lower cost for development of container terminals and in return maintain the right to regulate the THC. DS/ES replied that most of the land for the existing container terminals were disposed of by private treaty or by public tender which reflected market value of the land. The land costs related to terminals no. 1 to 6 were not high because the related lands were granted a long time ago. He further explained that the land for terminal no. 9 was disposed of by private treaty grant. This was to ensure that new operators were able to participate in container handling service which, in turn, would increase free market competition.

21. As regards the criteria for determining the land premium for terminal no. 9, SES advised that the Administration had taken the changing market situation into consideration and the land premium reflected the fair market value of the site.

22. The Chairman opined that even though the land price for terminal no. 9 was lower than previous terminals, the terminal operator concerned would probably levy THC similar to other terminal operators. SES reiterated that increased market competition would help to lower the terminal handling tariffs. He pointed out that even without terminal no. 9, the existing terminal operators had to lower container handling tariffs to attract new clients. He was confident that the large handling capacity of terminal no. 9 would reinforce market competition and lead to lower container handling tariffs and THC eventually.

23. Noting increased competition from ports in South China and neighbouring countries, Mr CHAN Kam-lam enquired whether there were sufficient justification for the construction of the proposed terminals no. 10 and 11. SES advised that the Port and Maritime Board prepared Hong Kong's port cargo forecast regularly and this would shed light on Hong Kong's future demand for container handling facilities. The Administration would take into account the updated forecast demands before making any decision on terminals no. 10 and 11. He further advised that as it would normally take five years for planning and constructing a new container terminal, the Government's policy was to complete preparatory work such as site investigation and infrastructure planning and decide the timing for the construction of the terminal having regard to the actual increase in throughput.

24. In reply to a member's question on timing for commencement of work on deepening the Rambler Channel, SES advised that the operator of terminal no. 9 would be responsible for the relevant work which should commence very soon.

25. On the progress on provision of additional back-up land for container terminal operation, DS/ES said that the terminal operators had put up proposals on rationalisation of back-up lands of different terminals with a view to increasing operation efficiency. Moreover, additional back-up lands would be available when construction of terminal no. 9 was completed. The Government was also exploring the possibilities of providing the Kwai Chung container operators with more backup land adjacent to the existing terminals to increase their capacity and promote competition.

26. On the question of impact of Shenzhen ports on Hong Kong, DS/ES advised that container ports at Shekou, Chiwan and Yantian together handled about 1.1 million TEUs in 1997, which was about 8% of Hong Kong's throughput. Due to their proximity to Hong Kong, competition from these ports was unavoidable. Hong Kong had to lower its container handling charges to remain competitive. He supplemented that Hong Kong would strengthen liaison with the Mainland port authorities to expand cargo source within the Pearl River delta area for mutual benefits of ports in Shenzhen and Hong Kong.

27. Referring to the proposed strategy to enhance competitiveness of the Hong Kong container port, Mrs Miriam LAU enquired about the benchmarks for assessing the degree of success of the strategy. DS/ES replied that the current difference in container handling charges between Hong Kong and Shenzhen was about 30%, the Administration hoped that with the implementation of the various measures, the difference in THC between Hong Kong and Shenzhen could be narrowed down. He envisaged that given Hong Kong's higher quality service and more frequent shipping schedules, Hong Kong container handling charges would be higher than Shenzhen but he hoped that the difference would gradually narrow in the long term. He further advised that it was important to help container truck operators to lower operating costs by shortening the time required for cross-border movement of containers. He said that if a container truck could increase one return trip each day between Hong Kong and Shenzhen, the productivity would have been doubled for the container truck. The Administration was collecting more data on congestion at the cross boundary check points for further discussion with the Mainland authorities. He hoped that improvement measures could be worked out as soon as possible.

28. Mrs Miriam LAU expressed concern about the low utilization rate of the new Tuen Mun River Trade Terminal which had apparently defeated the objective of promoting river trade, thereby reducing the cost of transporting containers between Hong Kong and Southern China. DS/ES advised that as the River Trade Terminal had only commenced operation for one month, it was too early to judge its effectiveness. He further explained that the Mainland's export cargo had decreased as a result of the recent financial market turmoil, which in turn had an adverse impact on river trade. As a long term strategy, the Administration would encourage mid-stream operators to build up strategic links with river ports in the Pearl River Delta.

29. Mr CHEUNG Wing-sum opined that if there were rail links to the container terminals in Hong Kong, containers could be shipped to the Mainland through the rail system which would relieve congestion at the road links. He enquired whether there were plans to provide rail links to the container terminals in the West Rail project. DS/ES confirmed that land had been reserved in Kwai Chung container port for future development of rail links. The Kowloon-Canton Railway Corporation had to conduct feasibility studies on a rail link to the container port in the context of development of the West Rail. Further information would be provided to members when the studies were completed. He added that Hong Kong had to take into account the Mainland's rail system in planning for a rail link to transport containerised cargoes between Hong Kong and the Mainland.

30. As to whether there was a mechanism to enable the Administration to induce a lower THC, DS/ES said that THC was charged by shipping lines and was related to the container handling tariffs charged by container terminal operators. Both container handling charges and THC were determined by the terminal operators and shipping lines respectively under commercial principles in response to market forces. Increased market competition would eventually lead to lower container handling tariffs and THC. The Administration would continue to encourage more transparency and consultation between shipping lines and shippers in the setting of THC.

VI Retail prices of major fuels
(LC Paper No. CB(1)499/98-99(03) - submission from Caltex Oil Hong Kong Limited

LC Paper No. CB(1)499/98-99(04) - submission from Mobil Oil Hong Kong Limited)

Meeting with oil companies and the Consumer Council

31. The submissions from Shell Hong Kong Limited and the Consumer Council were tabled at the meeting.

(Post-meeting note : The submissions from Shell Hong Kong Limited and the Consumer Council were circulated to other members after the meeting vide LC Paper No. CB(1)527/98-99(04) and (05))

32. Mr Fred LI pointed out that Shell Hong Kong Limited (Shell), Caltex Oil Hong Kong Limited, Mobil Oil Hong Kong Limited and Esso Hong Kong Limited had a combined market share of nearly 90% in respect of the unleaded petrol market in Hong Kong. Noting that these companies should have different operating costs, he doubted why the pump price of unleaded petrol of the four companies was the same at $10.4/litre. Mr Robert YOUNG of the Shell Hong Kong Limited replied that unleaded petrol was a homogeneous and price sensitive product. A company would lose its market share if its price was higher than the competitors. He said that market competition was the reason for similar pump prices of unleaded petrol. He further advised that market competition had led to an escalation of give-aways, discount schemes and oil coupons offered to customers. According to Shell's data, the costs of funding the discount coupons and discount schemes amounted to about $0.7/litre. He stressed that such benefits to customers had not come out of the cost of higher pump prices to consumers.

33. Some members were of the view that given import prices of unleaded petrol and diesel had decreased substantially over the last year and that operating costs could also be lowered in light of the prevailing economic condition, the local oil companies should be able to reduce its retail price instead of offering give-aways to customers. Mrs Miriam LAU Kin-yee pointed out that the ex-tax retail price of diesel had been reduced by $0.26/litre from January 1997 to August 1998 but import price of diesel had decreased by $0.86/litre during the same period.

34. In response, Mr Robert YOUNG explained that there in fact were reductions in retail prices of unleaded petrol and diesel in last January and March, with total reductions amounting to $0.2/litre in respect of unleaded petrol and $0.33/litre in respect of diesel. Moreover, in respect of diesel, there had been an improvement in quality, with the sulphur content reduced from 0.5% to 0.05%, with consequent increases in product import and selling prices. The retail price reductions, in absolute terms, were in line with decrease in import price of unleaded petrol and diesel. He further advised that to enhance transparency, Shell had provided information to the Government and Consumer Council each time it initiated a change in retail price of oil products. He supplemented that the major cost components of oil products in Hong Kong were Government tax which amounted to about 60% of the retail prices and the land/rental costs of retail stations which amounted to about $1/litre of oil products. The import price made up about 10% of the retail price of oil products. Mr YOUNG also explained that there were different types of diesels including diesel for automobile and industrial diesels. The import price of diesel as shown in Census and Statistics Department's publications covered all types of diesels and therefore did not correctly reflect the import price of automobile diesel. He said that while the international price for crude oil would ultimately affect the cost of all oil products in Hong Kong, there was actually no direct relationship between the price of crude oil and the import price of major fuels into Hong Kong because the market forces of supply and demand were different for each of the individual fuels.

35. Noting that the import price of domestic liquefied petroleum gas (LPG) had decreased by $0.77/kg in the past year but retail price of domestic LPG had remained unchanged, Mr CHEUNG Man-kwong enquired when the oil companies would lower the price of domestic LPG and whether the Government would intervene to protect consumers' interest. Mrs Pamela CHAN, Chief Executive of the Consumer Council, also considered that given the substantial difference between import price and retail price of domestic LPG, the oil companies should be able to lower the retail price. Mr Jack TO of the Caltex Oil Hong Kong Limited explained that import price of domestic LPG fluctuated seasonally with the price in winter more than 50% higher than that in summer. For this winter, LPG's import price had risen by 80%. If the retail prices of domestic LPG were to vary along with import prices, consumers would have to pay more when they needed LPG most. The current pricing policy was to maintain a stable retail price for domestic LPG throughout the year. On the other hand, a substantial investment was incurred by the oil companies to meet Government's safety standards for storage and sale of LPG and other requirements to protect the environment, which was also a major cost element for domestic LPG.

36. Mrs Pamela CHAN said that the Consumer Council was also concerned about the existing market structure for oil products in Hong Kong. The Council would like to see more price competition in this particular market. She also urged the oil companies to provide more detailed data on their cost components to enable a meaningful analysis on the fairness of the price level of oil products.

37. In response to a member's question on the land price for oil refilling stations, Mr Robert YOUNG said that land for oil refilling stations was sold by the Government through public tenders. Last year, according to published information in the Gazette, Caltex succeeded in tendering for a piece of land for a refilling station and the land premium was about $15,000/sq.ft. In the case of land premium for renewal of lease of Government land for use as refilling station, the cost including interest would amount to about $1.3 - 1.4/litre of oil products. Mr Jack TO also said that in order to maintain its market share, oil companies would submit very competitive bids for new refilling stations and hence the high land premium. He supplemented that rent payable to Government for Caltex's refilling station in Middle Road, Tsim Sha Tsui, was $1.3 million per month or equivalent to about $2.0/litre of oil products.

38. Mr Howard YOUNG said that whilst the land cost for different refilling stations varied, the pump prices for oil products were the same at all refilling stations. He enquired whether there could be price competition between different refilling stations. Mr Jack TO replied that his company's policy was that the overall operating costs should be equally shared by all refilling stations, hence unified pump prices for oil products.

Meeting with the Administration

39. Referring to the information paper provided by Consumer Council, some members expressed concern that data currently available to the public were insufficient for an assessment of whether the retail prices of oil products were fair and whether there was a price cartel amongst the oil companies. SES advised that under existing legislation the Administration had no authority in determining the prices of oil products. The price of oil products should be determined by market forces. However, the Administration was also concerned about whether the retail prices of oil products were fair having regard to the decreasing import prices of oil products. To follow up the matter, the Economic Services Bureau (ESB) would collect more data from oil companies for further examination. Meanwhile, he also hoped that instead of offering give-aways to customers, the oil companies could reduce the retail price to benefit consumers directly, particularly so in light of the current economic condition.

40. On the question of consumer interest, SES advised that the Trade and Industry Bureau would also be interested in protecting and promoting consumer interests. He said that ESB would follow up the subject by requesting oil companies to provide more data on their pricing of domestic LPG. On the basis of the data collected, ESB would examine whether the current retail price of LPG was fair and revert to the Panel at a later stage.Admin

41. Noting that land cost was a major cost component for oil companies, Mr CHAN Kam-lam enquired about the Government's policy on determination of land price for oil refilling stations. SES replied that policy on land prices was a matter for the Lands Department. As requested by the Chairman, SES agreed to analyse the impact of land price on retail prices of oil products and include the findings in the information paper on the overall subject of retail prices of oil products to be provided to the Panel.Admin

42. Concluding the discussion, the Chairman requested the oil companies to provide necessary data to the Government for analysis.Admin

VII Any other business

Implementation of the Electrical Products (Safety) Regulation (EPSR)
(LC Paper No. CB(1)229/98-99(02) - A joint submission from two trade associations

LC Paper No. CB(1)260/98-99 - Information paper provided by the Administration)

43. Mr Fred LI Wah-ming said that the EPSR was gazetted in May 1997. The trade's main concern was related to the Certificate of Safety Compliance (CSC) provisions which were scheduled to be brought into operation in November 1998. The parallel importers of electrical products had expressed concern that they were unable to obtain certificates from the manufacturers certifying the safety of the electrical products concerned. If the CSC provisions came into operation on 28 November 1998 as scheduled, all the existing stock of parallel-imported electrical products would become non-compliant products and could not be sold in Hong Kong, causing huge financial loss and loss of many jobs in the retailing sector. Given that parallel-imported electrical products offered additional choices to consumers and that they were also genuine products of the manufacturers, the Administration should consider assisting the parallel-importers to comply with the CSC provisions. He suggested that the implementation of the CSC provisions should be deferred pending discussion amongst the Administration, the trade and Consumer Council with a view to solving practical problems regarding compliance with the CSC provisions.

44. Members supported Mr LI's suggestion. They pointed out that whilst public safety was of prime importance, the Administration should try to avoid imposing policies which would cause loss of jobs, particularly in light of the current difficult economic situation. They urged the Administration to try to achieve a reasonable balance on the subject matter.

45. Mrs Selina CHOW LIANG Shuk-yee said that the EPSR was not targetted at the parallel-importers, but rather to ensure public safety. She remarked that before enactment of the EPSR, Legislative Councillors had discussed with representatives of the parallel-importers, and reflected their views on the draft EPSR to the Administration. Representatives of parallel importers requested at that time that parallel imports should be exempted from the CSC provisions. The Administration had rejected this proposal on ground of public safety. She further advised that the parallel importers had requested the Administration to adopt a flexible approach on stocks of parallel-imported electrical products. In this regard, the Electrical and Mechanical Services Department (EMSD) had been discussing with the trade regarding transitional arrangements.

46. SES stressed that the EPSR which was gazetted in May 1997 was not targetting at parallel imports. The Administration considered that any electrical product which complied with the CSC provisions could be sold in Hong Kong. He reiterated that parallel-imported electrical products should not be exempted from CSC provisions for the sake of public safety. However, he agreed that the Administration should find a balance between ensuring public safety and minimizing adverse economic impact on the society, such as loss of jobs. During the past one and half years' transitional period, the EMSD had held many discussions with the trade, including parallel importers, on transitional measures to assist them to comply with the EPSR. In view of members' suggestion, he agreed to defer the implementation of EPSR by one month. The EMSD would, during the coming month, try to discuss with the trade and jointly work out measures to facilitate compliance of parallel importers with the CSC provisions. A progress report on the subject would be provided by the end of 1998.Admin

(Post-meeting note: The report has been circulated vide LC Paper Nos CB(1)701 and 703/98-99.)

47. There being no other business, the meeting ended at 1:15 pm.

Legislative Council Secretariat
22 February 1999