Complaints encircle petrol price regulation

The Decree No. 107 on gas trade and management, which was hoped to regulate the gas market, went into effect on January 15, 2010. Yet the law has done little to stabilize gas prices.

The world gas price for March 2010 decreased by $12.5 per tonne to $722 over the previous month. Therefore, the domestic gas retail price should have reduced at least 4,000 dong per 12 kilo tank. Instead, gas suppliers raised the price by 2,000-10,000 dong to 275-285,000 dong per tank.

Explaining the increases, Vietnam Gas Association members cite that the dollar has become 621 dong more expensive.

Gas traders who are not part of the association, in contrast, do not agree. They suggest that while the dollar has become more expensive, the world price has been decreasing, so there is no reason to raise the gas retail price.

Economic analysts warn that it may be difficult to sell large quantities of gas if the retail price is high. Moreover, if these stocks cannot be cleared by April, gas traders may suffer losses, as gas demands will decrease sharply during the hottest months when the world price will decrease even further.

Others have also pointed out that blaming high dollar prices is not convincing. Companies had to purchase dollars at high rates during the whole of last year, when the dong/dollar exchange rate once hit the 19,500 dong mark.

Gas retailers explain that the decree’s strict regulations (traders must have depots with 800 cubic meter capacity or higher and 300,000 gas tanks) have caused market problems. The strict new rules mean that 50 gas traders are unable to operate any more.  Only the largest gas firms still exist and they can collude with each other to set prices.

The regulation that every gas agent can sell products with three different trademarks has also been cited as unreasonable. Sales agents can demand high commissions from distributors, or else they will shift to selling a rival’s products. Who suffers in these cases? Consumers.

According to Nguyen Quang Trung, General Director of MT Gas, wholesale gas now sells at 240,000 dong per 12 kilo. The retail price is 265,000 dong per tank, providing high commissions of 25,000 dong per tank.

Tran Trung Nhat, Director of Thai Duong Company which owns the Sunpetro Gas trademark, estimated that agents earn 33,000 dong per tank in commission.

Dinh Co and Dung Quat refineries now meet 75-80 percent of the market demand for gas. However, the problem is that gas traders, when purchasing gas from the two sources, must pay import taxes of five percent. Gas traders believe that the five percent tax is unreasonable, costing consumers 10,000 dong more for every tank of gas. Vietnam Gas Association Chair Nguyen Si Thang reports that they will propose slashing the tax rate to zero or two percent.

VietNamNet/NLD

Tags: Vietnam petro, Vietnam Petrol prices, Vietnam Petroleum