CHINA will implement a fuel tax this year “when the conditions are right” to replace the road maintenance fee and other transport-related surcharges, the Finance Ministry said in a report delivered Monday at the annual session of the National People’s Congress.

Analysts say China is likely to consider a 20-50 percent tax on retail gasoline and diesel prices, which are among the world’s lowest.

But imposing a tax at a time of record-high oil prices could hamper key economic sectors and anger the country’s hundreds of millions of farmers.

Analysts say China may opt to introduce the new tax in phases to allow consumers to gradually adjust to higher costs and avoid any big negative impact on business and industry.

“Implementation of a fuel oil tax is essential,” said Wu Jinglian, a renowned Chinese economist. “But it will definitely affect the auto industry.”

Higher fuel costs may encourage the booming young middle-class to buy energy-efficient, low-emission vehicles instead of gas-guzzling sports cars.

But a sharp drop in car sales would hurt the automaking sector, one of the country’s cornerstone industries and a key tax revenue source for 80 percent of Chinese provinces.

The idea of a fuel tax was initiated in 1994, when oil was below US$20 a barrel, as a means of replacing road tolls. But volatile prices and issues such as how to split tax revenues among government agencies have so far delayed its introduction. (SD-Agencies)