Fuel imports increase 38.7 percent

Import of gasoline grew by 38.7 percent year-on-year in the first 10 months of 2017 to 210.5 million USD, according to the National Statistics Office (NSO).

The import of diesel fuel increased by 90.7 percent compared to the first 10 months of 2016, totaling 347.9 million USD.

A revival in the economy, increased consumption, and improved purchasing power were cited as the reasons for the dramatic increase.

The import of aviation fuel in the first 10 months totaled 24,800 tons, marking a rise of 24 percent compared to the same period in 2016.

With the Organization of the Petroleum Exporting Countries (OPEC) agreeing to cut their production along with the depreciation of the MNT in 2016, Cabinet found itself in a predicament. With the threat of petroleum prices surging up to unsustainable levels, Cabinet made the decision to cut the petroleum import tax from 160,000 MNT per ton to 30,000 to 50,000 MNT per ton. The diesel fuel tax rate was cut from 180,000 MNT to 70,000 MNT.

However, due to the IMF’s extended fund facility program, these tax breaks began to be reversed in stages. In July 2017, the tax on petroleum imports were raised to previous levels. The government forecasts that reversing the tax cuts will lower the state’s 210 billion MNT fiscal deficit to 118.6 billion MNT.

The tax on fuel import was supposed to be increased in October again but due to a proposal from the Ministry of Mining and Heavy Industry, the decision was postponed and will be discussed in Cabinet.

NSO reported that 10.6 billion MNT in taxes from imported fuel was contributed to the state budget.

Russia, in particular Rosneft, is the largest exporter of fuel to Mongolia, accounting for 94 percent of fuel imports in 2016. The remainder were imported from China and other various countries through Zamyn-Uud border crossing and Tianjin Port.

In 2017, it is estimated that 96 to 98 percent of fuel will be imported from Russia with the remainder coming from China.