Experts urge change to fuel price rule

Insiders of the fuel sector are calling for a change in Decree No 84 which they say are preventing domestic petrol wholesalers from earning profits.

Under the Ministry of Finance’s Circular No 84 which took effect in December 2009, wholesalers’ prime cost for petrol is made up of the average price paid for petrol imported from Singapore within 30 days, taxes, marketing, distribution costs and a “rationed profit” of VND300 a liter.
With this calculation, the current prime cost of gasoline is higher than the retail price by VND900 a liter. But as the prime cost already includes the “rationed profit” of VND300 a liter, the real loss of distributors on every liter of gasoline is VND600.
Experts said domestic fuel distributors shouldn’t operate with losses considering the price of crude oil has being falling sharply recently.
On October 5, Brent crude oil slumped to only $99.79 a barrel, the lowest price since last February, making the gasoline price in Singapore, which is Vietnam’s main supplier, fall to $113.85 a barrel.
Should the prime cost calculation be applied with this imported price instead of the average number of the last 30 consecutive days, local wholesalers’ prime cost of gasoline is only VND20,140 a liter, lower than the current retail price by VND660 a liter.
If the average imported gasoline price within the last 10 days is used for calculation, wholesalers still earn a profit of some VND800 a liter as the prime cost will be VND20,000.
Experts thus blamed Decree No 84 for handicapping domestic fuel price adjustment.
An expert said since the world fuel price often fluctuated in a period of seven to ten days, Vietnam would likely miss the chance to adjust fuel retail prices if they had to wait 30 days to get the average imported price.
In fact, consumers have twice missed the chance to enjoy a price cut in June and August because of this shortcoming.
An executive of a fuel analyzing company suggested that prime cost should be calculated based on the average imported price in seven days to enable wholesalers to adjust prices in time with the global fluctuation.
Other experts also said the average time of ten days would be more reasonable.
They also urged the Ministry of Finance to remove the “rationed profit” from the prime cost to increase the transparence when it comes to a comparison between the retail price and prime cost. – Tuoitre

Tags: Vietnam fuel, Vietnam fuel prices

Posted by VBN on Oct 7 2011. Filed under Oil-Gas & Petroleum. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry