LC Paper No. CB(1) 906/98-99
(These minutes have been seen
by the Administration)
Ref : CB1/PL/TP/EA
Panel on Transport and
Panel on Environmental Affairs
Minutes of joint meeting held on
Friday, 27 November 1998, at 8:30 am
in the Chamber of the Legislative Council Building
Members present :
Members of Panel on Environmental Affairs
Hon Christine LOH (Chairman)
Hon HUI Cheung-ching (Deputy Chairman)
Hon Bernard CHAN
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Members of Panel on Transport
*Hon Mrs Miriam LAU Kin-yee, JP (Chairman)
Hon LEE Wing-tat
Hon LEE Kai-ming, JP
*Hon CHAN Wing-chan
Hon TAM Yiu-chung, JP
Hon FUNG Chi-kin
Dr Hon TANG Siu-tong, JP
Members of Panel on Environmental Affairs
Prof Hon NG Ching-fai
Dr Hon LEONG Che-hung, JP
Hon WONG Yung-kan
Hon YEUNG Yiu-chung
Hon CHOY So-yuk
Hon LAW Chi-kwong, JP
Members of Panel on Transport
*Hon LAU Kong-wah (Deputy Chairman)
Hon Edward HO Sing-tin, JP
Hon Albert HO Chun-yan
*Dr Hon Raymond HO Chung-tai, JP
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon CHAN Kam-lam
Hon Andrew WONG Wang-fat, JP
Hon LAU Chin-shek, JP
Hon Andrew CHENG Kar-foo
* Also a member of Panel on Environmental Affairs
Public officers attending:
Attendance by invitation:
- Mr Kim SALKELD
- Deputy Secretary for Planning, Environment and Lands
- Miss Agnes KWAN
- Acting Principal Assistant Secretary for Planning,
Environment and Lands (Environment)
- Mr TSE Chin-wan
- Assistant Director of Environmental Protection (Air)
- Mr MOK Wai-chuen
- Principal Environmental Protection Officer
Environmental Protection Department
- Miss Eliza LEE
- Principal Assistant Secretary for Transport
- Mr Alan LUI
- Assistant Commissioner for Transport
- Mr CHIU Yue-wing
- Senior Engineer, Transport Department
- Mr Simon CHEUNG
- Chief Transport Officer, Transport Department
- Mr Eric JOHNSON
- Principal Assistant Secretary for Economic Services
- Mr CHEUNG Ping-kuen
- Senior Engineer/Gas Systems,
Electrical & Mechanical Services Department
Clerk in attendance :
- Dr Gordon S MAXWELL
- Assistant Professor, Environmental Studies,
The Open University of Hong Kong
- Mr LEUNG Shiu-cheong
- Urban Taxi Associations Joint Committee
- Mr KWONG Hon-wah
- Urban Taxi Associations Joint Committee
Staff in attendance :
- Mr Andy LAU
- Chief Assistant Secretary (1)6
I Election of Chairman
- Miss Odelia LEUNG
- Chief Assistant Secretary (1)1
- Mr Daniel HUI
- Senior Assistant Secretary (1)5
Ms Christine LOH was elected Chairman of the joint meeting.
II A proposal to introduce liquefied petroleum gas (LPG) taxis
(LC Paper No. CB(1)521/98-99(01) - a submission from Dr Gordon S MAXWELL
LC Paper No. CB(1)521/98-99(02) - a submission from the Urban Taxi Associations Joint Committee)
Meeting with deputations
2. Dr Gordon S MAXWELL of the Open University of Hong Kong briefed members on New Zealand's experience in introducing LPG vehicles as set out in his written submission.
3. Mr LEUNG Shiu-cheong and Mr KWONG Hon-wah of Urban Taxi Associations Joint Committee said that the Associations supported the LPG taxis scheme but expressed concerns about the implementational problems of the proposed scheme as set out in the Associations' submission. They made the following additional comments :
- In view of the current credit policy of the banking sector, it would be impossible for taxi operators to obtain loans from banks for purchase of LPG taxis.
- The proposed time-frame of replacing all existing diesel taxis by 2005 was unrealistic. The Government should consider deferring the target completion date of the conversion scheme to 2010.
- If the Government insisted upon replacement of all diesel taxis by 2005, the Government should provide financial support to taxi operators for purchase of LPG taxis. The financial support could be in the form of interest-free or low-interest loans. The Associations estimated that the total cost for replacing all the 18 000 diesel taxis currently operating in Hong Kong would amount to about $3.6 billion.
- The Associations were also concerned about the Government's recent move to allow 170 existing taxis to switch to operate on LPG on a voluntary basis even though the supporting infrastructure, including LPG filling stations and maintenance workshops for LPG vehicles, had yet to be enhanced.
- The recent increase in taxi licence premium was a reflection of the improving investment climate as a result of the decreases in interest rate in October 1998. The operating environment for taxis remained difficult.
4. Referring to paragraph 2.1 of Dr MAXWELL's submission which made reference to a reduction in maintenance costs of LPG vehicles as compared with that of diesel vehicles in New Zealand, Mrs Miriam LAU enquired whether this would be the case for Hong Kong as LPG taxis could only be serviced by large garages specified by the Government. Dr Gordon S MAXWELL advised that from a technical point of view, maintaining diesel/petrol engines were more complicated than maintaining engines burning LPG. There was no basis for higher maintenance costs for LPG vehicles if the Government could supply adequate number of service mechanics for LPG vehicles through increased training resources in the training institutes. He added that it was unnecessary for LPG vehicles to be serviced by specified garages which were at the top end of the market. Small garages with suitable equipment and trained service mechanics should be allowed to provide maintenance service to LPG vehicles in order to reduce maintenance costs.
5. In reply to Mrs Miriam LAU's question on provision of more LPG filling stations, Dr Gordon S MAXWELL advised that Hong Kong should aim at providing more multi-fuel filling stations which were safe and efficient if all safety requirements were stringently observed, as with the successful experience in New Zealand. He, however, doubted the need to specify that LPG filling stations had to be at least 55 metres away from residential buildings as currently required in Hong Kong.
6. Mr HUI Cheung-ching opined that in addition to measures to lower operating costs, taxi operators should examine the necessary tax incentives to enhance their economic viability in switching to LPG taxis. Mr KWONG Hon-wah of the Urban Taxi Associations Joint Committee agreed with Mr HUI's observation and urged the Government to provide tax incentives to taxi operators.
7. Mrs Miriam LAU pointed out that the price of automobile LPG had to be substantially lower than diesel in order to provide incentives for taxi operators to switch to LPG vehicles. Dr Gordon S MAXWELL agreed and added that in Auckland and Bangkok the price of automobile LPG was lower than diesel and Hong Kong should be able to do the same. He suggested that the Government should learn from other major cities' experience in promoting the use of LPG vehicles.
8. The Chairman enquired about the reasons for willingness of commercial banks in New Zealand to provide credit facility to customers for purchase of LPG vehicles. Dr Gordon S MAXWELL replied that commercial banks in New Zealand were encouraged by the New Zealand Government to provide loans to LPG vehicle purchasers at low interest rates. The banks also saw merits in supporting the purchase of LPG vehicles because such purchases would contribute to the economy as well.
9. In reply to Mr KWONG Hon-wah's concern about the performance of LPG vehicles, Dr Gordon S MAXWELL advised that except when the filter pump of a LPG vehicle was not working properly, the power generated by a LPG-fuelled engine would not be reduced even if the fuel tank was only partly filled up.
Meeting with the Administration
(LC Paper No. CB(1)521/98-99(03) - Information paper provided by the Administration)
10. Introducing the information paper provided by the Administration, the Deputy Secretary for Planning, Environment and Lands (Environment) (DS for PEL/E) advised that the proposal to introduce LPG taxis to Hong Kong was one of a series of measures to improve air quality, and there was no intention to target taxi operators alone. Whilst there was a strong political commitment from the Administration to introduce LPG taxis to Hong Kong, the Administration was well aware that the proposal would have major impacts on the operation of taxi owners and drivers. He appreciated the co-operation and support rendered by the trade in the LPG Taxis Trial Scheme. On the way forward, he said that the Administration would continue to consult relevant parties to ensure that a viable operating environment would be created before a full scale conversion scheme was implemented.
11. Mr CHAN Wing-chan said that representatives of taxi owners and operators had indicated that the trade needed $3.6 billion to replace the existing 18 000 diesel taxis and that they had difficulties in obtaining loans from financial institutions to finance the purchase of LPG taxis. He asked if the Administration would consider offering low-interest loans to assist taxi operators if the Administration decided to replace all existing diesel taxis by 2005. Mr LEE Kai-ming pointed out that specifying a date for full conversion to LPG taxis would be an administrative order and in so doing, the Administration would have a duty to assist taxi operators who had difficulties in complying with the administrative order. The Chairman advised that she had on previous occasions urged the Administration to provide $4 billion which could be in the form of low-interest loans to assist taxi operators to convert to LPG taxis.
12. In response, DS for PEL/E advised that a taxi owner had to replace his taxi after a period of operation, irrespective of whether it was a diesel taxi or LPG taxi. The Administration had to be very careful before deciding to use public money to finance taxi operators for replacing their vehicles. The Administration, none the less, was considering all necessary measures to ensure a smooth conversion to LPG taxis.
13. Mrs Miriam LAU was very disappointed that despite the time-table for full conversion to LPG taxis by 2005, the Administration had hitherto not indicated one single financial incentive to assist the taxi trade. She said that the Administration seemed to believe that the trade could adapt to the conversion scheme without Government assistance. On the other hand, representatives of the trade had already made clear that without financial and other infrastructure support including low LPG price and maintenance costs, adequate supply of LPG filling stations, etc, the taxi trade would not be able to switch to LPG taxis. DS for PEL/E noted Mrs LAU's comments and advised that the Administration had not ruled out the possibility of financial incentives for taxi operators, but it had to collect views from all relevant parties before deciding on the type of support measures.
Retail price of automobile LPG
14. Mrs Miriam LAU said that the price of automobile LPG had to be sufficiently lower than diesel in order to make the conversion scheme viable. However, land premium of oil product filling stations was the single most important cost element in the pricing of oil products including LPG. She enquired about the Administration's policy on land premium with respect to oil product filling stations. DS for PEL/E advised that the land premium of oil product filling stations was determined by the market. He and representatives from other concerned Bureaux and Departments had met with the oil companies, and provided the companies with details on sites identified as suitable for LPG filling stations. Moreover, the safety requirements with respect to LPG filling stations had also been provided to the oil companies to enable them to prepare cost estimates. It would be up to the oil companies to submit tenders for these sites, taking into account the prevailing economic climate including developments in the property market.
15. Replying to Mrs Miriam LAU's question on land premium payable if an existing oil product filling station was to sell LPG in addition to the existing products, the Assistant Director of Environmental Protection advised that if the lease of an oil filling station specified that the land was to be used for oil filling station purpose, no additional land premium would be required for selling of additional oil products such as LPG. However, if the lease did not so specify, additional premium might be payable.
16. Mrs Miriam LAU opined that the Government should review its policy on land premium for oil product filling stations. Otherwise, it was unlikely that the retail price of LPG could be lowered. Mrs Sophie LEUNG LAU Yau-fun advised that multi-fuel filling station was a trend in all major cities and she urged the Administration to examine the issue from a broad perspective with a view to facilitating the selling of LPG in existing oil product filling stations. In response, DS for PEL/E advised that the Administration supported the multi-fuel filling station concept and in fact many existing filling stations were multi-fuel filling stations. He further advised that with some structural modifications to meet the safety requirements for storage and handling of LPG, many existing filling stations could become LPG filling stations as well. On the price of LPG, he supplemented that the oil companies were supportive of the proposed conversion to LPG taxis and had made an effort to lower the price of LPG during the trial period so as to make it more competitive than diesel. He believed that the oil companies' pricing strategy for LPG would be maintained. DS for PEL/E reiterated that the Administration could only provide relevant data required by the oil companies in calculating the retail price of LPG, but the eventual retail price had to be determined by the market under commercial principles.
17. Mr LEE Wing-tat pointed out that during a discussion on the price of oil products at a meeting of the Panel on Economic Services, members observed that there was a significant gap between the import prices and retail prices of oil products and hence, there should be a substantial margin for reduction of retail prices of oil products. He also expressed concern that there might be a price cartel amongst oil companies in Hong Kong which had led to unreasonably high retail prices. The Principal Assistant Secretary for Economic Services replied that there was no evidence that a price cartel existed amongst oil companies. He further advised that at the meeting of the Panel on Economic Services on 23 November 1998, the oil companies had agreed to provide detailed data to the Administration and the Consumer Council for an analysis on retail prices of oil products. The Economic Services Bureau would soon liaise with the oil companies for additional data, and a report would be provided to the Panel on Economic Services after completion of the analysis.
18. Mrs Miriam LAU said that it was important for the taxi trade to know the price level, if not the exact retail price, of automobile LPG before the trade could assess their position on the conversion scheme. She enquired whether the Administration had considered reduction of fuel tax on automobile LPG to ensure that its retail price would be more competitive. DS for PEL/E replied that the Administration was doing all it could to enable the oil companies to calculate a market price for automobile LPG. Allowing 170 existing taxis to switch to operate on LPG on a voluntary basis was a move towards that objective. He further advised that there would certainly be a benchmark retail price for automobile LPG before the Government took a decision on the conversion scheme. As regards tax reduction on automobile LPG, he said that the Administration would consider this option together with other financial incentives to ensure smooth implementation of the conversion scheme.
Number of LPG filling stations
19. Mr HUI Cheung-ching doubted whether the provision of some 40 sites for LPG filling stations as stated in the information paper provided by the Administration would be adequate to meet the demand of the 18 000 taxis. DS for PEL/E advised that there were, at present, 62 sites identified as suitable for LPG filling stations and the site identification process would continue.
20. The Chairman enquired whether the Administration had calculated the economic benefits that could be brought about by the proposed conversion to LPG taxis. DS for PEL/E advised that apart from improvements to air quality, there were economic benefits arising from the conversion scheme but the Administration had yet to estimate such benefits.
III Any other business
The way forward
21. The Chairman suggested and members agreed that joint meetings of the Panels would be held to follow-up on the proposed conversion scheme. Members agreed that the next meeting would be held on 15 December 1998 at 2:30 pm to discuss the following subjects :
- maintenance service for LPG vehicles; and
- training of service mechanics for LPG vehicles and education on improvement of driving skills.
22. Members also agreed that another meeting would be held to discuss financial incentives to assist taxi operators to convert to using LPG taxis.
23. There being no other business, the meeting ended at 10:30 am.
Legislative Council Secretariat
3 March 1999