BABIL PC REGULATES FUEL SUPPLIES AND LEVIES TAXES FOR

C O N F I D E N T I A L SECTION 01 OF 02 HILLAH 000114

SIPDIS

SIPDIS

E.O. 12958: DECL: 7/28/2017
TAGS: ENRG EPET ECON EFIN PGOV SOCI IZ
SUBJECT: BABIL PC REGULATES FUEL SUPPLIES AND LEVIES TAXES FOR
CHARITABLE CAUSES

REF: A) HILLAH 108 B) BAGHDAD SBU O-I, 7/19/2007

HILLAH 00000114 001.2 OF 002


CLASSIFIED BY: Charles F. Hunter, PRT Leader, PRT Babil, REO
Al-Hillah, U.S. Department of State.
REASON: 1.4 (b),(d)




1. (U) This is a PRT Babil Cable.


2. (C) PRT Babil recently met with Basem al-Janabi (ISCI),
chairman of the Babil Provincial Council (PC) energy committee
to discuss the provincial government's efforts to regulate the
distribution of fuel supplies in the province. Formed in 2006
with the consent of the PC, the committee also levies taxes on
fuels. According to Basem, in addition to funding the
committee's budget, fees go toward traditional charitable causes
rather than the maintenance and development of provincial
infrastructure and essential services. Approximately 300
employees collect the fees, which Basem claimed amounted to ID 1
billion over the past year. These funds go toward life-saving
medical treatment and assisting unmarried persons of both
genders to marry (NFI) rather than provincial infrastructure and
essential services. Among officials and the public, allegations
of official corruption are rife, but impossible to pinpoint.

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GASOLINE, DIESEL, PROPANE, AND KEROSENE
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3. (U) Babil taxes gasoline and diesel bound for commercial
vehicles according to vehicle size. This fee is paid upon entry
into the filling station with rates ranging from ID 250 for
small vehicles to ID 1000 for large trucks. Officially,
commercial users of propane in Babil province are taxed ID 1000
per cylinder, though several local staff report having to pay
varying amounts of extra charges on top of the official price.
Allocation of funds is subject to PC approval. In light of last
winter's kerosene shortage, Basem said that the PC was
stockpiling on supplies during the summer in order avoid another
shortage. He claimed that Babil plans to allocate 220 liters
per household, and contrasted this to last year when residents
were "lucky to receive 150" liters. The committee plans to
impose a tax of ID 150 on the 220 liter allocation. Basem also
attempted to address the allegations of corruption, noting the
committee's declared efforts to end corruption in the
distribution process by replacing the easily forged ration
coupons printed by the province last year with a roster of
residents provided to the distributor who then verified
identities against his list.

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NEIGHBORHOOD GENERATORS: REGULATION AND ITS DISCONTENTS
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4. (SBU) The PC requires all neighborhood generator operators to
register with mokhtars (neighborhood chiefs) who, in turn,
coordinate with the district council (DC) energy committee to
determine the monthly diesel allocation required by each
generator per month. Due to rising fuel prices -- particularly
on the black market -- the committee capped the price of
electricity from neighborhood generators at ID 6,000 per ampere
(ref A) and demanded neighborhood operators run their generators
six hours per day in return for price and supply guarantees.
However, the PC's actions have not satisfied the demands of
generator operators who recently joined tanker drivers in a
protest outside the Babil PC building in al-Hillah over Babil's
low fuel allocation and continuing long lines of between five
and seven hours at the pump. Basem responded by assuring the
demonstrators that their rations would be increased to 300
liters, the appropriate allotment, as opposed to the 100 liter
limit which Basem said was a result of poor distribution to
Babil province (refs B). (Note: Sources report no increase in
the fuel ration. End note.)

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COMMENT:
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5. (C) Comment: Babil's ramshackle energy policy stems from an
unclear separation of powers between national and provincial
authority, along with an ingrained and knee-jerk socialist
response to the chronic energy shortages caused by a combination
of a poor security environment and the persistence of a command
economy in the energy sector. With regard to the power to levy
taxes, the Babil PC appears to be acting within the guidelines
established by CPA 71, which grants governorate councils the
authority to tax. The energy committee's decision to allocate
such funds toward charitable purposes is reflective of Islamic
tradition, while its policies taken in response to the shortage
of energy have only served to exacerbate widespread public
discontent at the long gas lines and insufficient power, not to
mention fueling the ire of generator operators who resent PC

HILLAH 00000114 002.2 OF 002


efforts to limit their profits. Moreover, the opaque accounting
methods and pricing inconsistencies raise serious questions
regarding corruption or, even worse, the possibility that a
portion of the revenue may go toward nefarious purposes. That
said, Babil's regulation and taxation of energy are apparently
unique among provinces in the south central region. It is too
early to tell, however, if these policies will morph into a more
sophisticated provincial revenue collection policy. End Comment.
HUNTER