A filling station worker was changing the price tags for gasoline early this morning in Qingdao City of Shandong Province.

China decided to slash domestic fuel prices starting midnight Thursday, as the country gave a green light to a long-awaited plan on fuel taxes and refined oil product pricing.

The country would slash the benchmark prices for fuel starting midnight Thursday, said the National Development and Reform Commission (NDRC).

The benchmark prices for gasoline would be reduced to 5,580 yuan per tonne, down 900 yuan (131.7 U.S. dollars), or almost 14 percent, while those for diesel was adjusted to 4,970 yuan per tonne, down 1,100 yuan, or more than 18 percent.

The commission explained that pump prices for gasoline would be tuned down by 0.91 yuan per liter, from midnight Thursday, and diesel prices down by 1.08 yuan per liter.

In the meantime, the benchmark prices for jet fuel would be slashed by a bigger margin of more than 30 percent, or 2,400 yuan, to 5,050 yuan per tonne.

Such moves to cut fuel prices had come along with the country's newly approved plan on fuel taxes and pricing reforms. The State Council said Thursday it had decided to put the plan into effect on Jan. 1, 2009.

The country will annul six types of fees on road maintenance and management, and at the same time raise the gasoline consumption tax from the current 0.2 yuan per liter to one yuan per liter and diesel consumption tax from 0.1 yuan per liter to 0.8 yuan one liter, according to the plan.

These details are the same as stated in the draft plan, which was unveiled earlier this month to solicit public opinion.

The draft plan was largely welcomed by Chinese drivers, as they would be able to pay less if they drive less. Currently, automobile users are charged with fixed fees regardless of how much gasoline or diesel oil they use.

But many expressed worries over a hike in fuel prices because of the fuel tax.

The NDRC made it clear Thursday that domestic fuel prices would remain unchanged on Jan. 1, 2009, when the fuel tax is expected to kick in.

The State Council also said the country's domestic prices would be "indirectly linked" to global crude prices "in a controlled manner".

The pricing of domestic refined oil prices would be based upon global crude prices, while also taking into account domestic production cost, taxation, logistic fees and "appropriate profits", according to the plan.

China's government-set fuel prices change infrequently. Chinese drivers are paying much more than those in many other countries because domestic fuel prices have been unchanged since June despite tumbling global prices.

China has been pushing for fuel tax reform for many years, and the idea of a fuel tax was raised as long ago as 1994. Both government officials and academic economists have said that the current global oil price plunge presents a window of opportunity for this reform.

The world crude oil price has plunged more than 70 percent from a peak of 147 U.S. dollars per barrel in mid-July.

(Xinhua News Agency December 19, 2008)