New rules may strangle smaller gas distributors

Cooking gas distributors are worried about their fate when a new decree managing the trade takes effect on October 1.

Under Decree No 107, every gas distributor will be required to maintain a storage facility with a total tank capacity of 800cu.m, a standard extraction system, and at least 300,000 gas cannisters that meet quality standards.

Each distributor will also be required to operate a network of at least 20 dealers.

“Small- and medium-sized distributors will not be able to meet the requirements of the decree, and it will probably mean death for them,” said Nguyen Van Vien, the director of Thang Long Trade and Development Co in the northern province of Thai Nguyen.

These firms, especially in rural and remote areas like Thai Nguyen and Tuyen Quang, cannot maintain such large big depots because they don’t have that many customers, said Vien.

“Our company now only has a depot with a capacity of 100cu.m, which is enough for us to supply gas to dealers in Thai Nguyen and neighbouring provinces,” he said.

It would also take six small- and medium-sized companies to gather together 300,000 cannisters, he added, noting his company now only had 100,000.

The director of Ha Noi-based Ngon Lua Than Co, Ly Tran Dung, also complained that his company would have to spend VND120 billion (US$6.3 million) to upgrade its depot and increase the number of cannisters, most of which would then remain idle as there were no need for such high a number.

“Many gas firms will become insolvent after September 30, when the decree takes effect,” Dung said. “They will not be able to repay bank loans, as an estimated 70 per cent of their capital comes from banks.”

Some firms could potentially merge to form larger firms, but that could take time, he said.

Twenty-two gas companies in the southern region have already petitioned the Prime Minister to delay implementation of the decree and revise its provisions, saying few gas distributors could meet the requirements stipulated in the decree and claiming that many would go bankrupt. This might lead to a monopoly in the gas market, they said. — VNS

Tags: Vietnam gas, Vietnam Gas prices