Petrol business- a burning issue

Petrol businesses claim to be operating at a loss as the price stabilisation fund has been used up while cross-border petrol smuggling is still rampant.

At a recent online conference held by the Ministry of Industry and Trade (MoIT), many petrol wholesalers across the country mentioned a host of difficulties in petrol business management.

The Director of the Ba Ria-Vung Tau Department of Industry and Trade, Tran Thi Huong said during the time of adjusting petrol prices, several petrol stations had to close, leading to a drop of 70 percent in petrol supply.

According to the Deputy Director of the Kien Giang Department of Industry and Trade, Lam Thanh Hung, relevant agencies have taken strong measures to control the cross-border petrol smuggling situation by fixing the time for buying petrol from 6 am to 6 pm and limiting sales of petrol after hours.

To deal with the false scarcity of petrol in recent times, Hung proposed adopting a flexible policy to control petrol prices and prevent speculators driving the prices up.

Meanwhile, Huong underlined the need for MoIT to ask petrol businesses to ensure a sufficient supply in order to stabilise the domestic petrol market.

The Minister of Industry and Trade, Vu Huy Hoang, admitted that after two times of adjusting prices, petrol businesses can recoup losses or make a small profit. However, the petrol prices in some border provinces are still VND 2,000-3,000 per liter lower than in other areas, which has caused cross-border petrol smuggling.

Wholesalers operating at a loss

The Deputy General Director of the Vietnam National Oil and Gas Group (PVN), Vu Quang Nam, said that by the end of March PV Oil had sold 1.3 million cu.m of petrol and Ptech had sold 402,000 cu.m. PVN had suffered losses of VND780 billion by the end of the first quarter. In an effort to provide enough petrol for the domestic market PVN planned to produce 450,000cu.m of petrol in April.

Dam Thi Huyen, Deputy General Director of Petrolimex, said the company had suffered a heavy loss of VND2,650 billion on account of increasing its shares by 20 percent in the first quarter. Moreover there would be some VND1,854 billion added to the loss after the issuance of a new exchange rate on February 11.

Huyen revealed that Petrolimex had to borrow US$1.061 billion. Each time the State Bank of Vietnam (SBV) decided to adjust the exchange rate by 5-10 points Petrolimex lost VND5-10 billion a day. If there are not suitable measures put in place the company will run up huge debts.

By October 2010, Petrolimex’s foreign currency outstanding had reached US$1.061 billion as it had to import petrol. However, it was until the end of the fourth quarter of 2010 that Petrolimex was allowed to borrow around US$380-400 million. SBV should have devised a suitable exchange rate policy early to help importers feel secure about their debts, Huyen said.

Now with the petrol price stabilization fund running a deficit of VND703 billion the State should adopt a special policy to compensate businesses for the losses they have suffered, instead of just applying market mechanism.

Minister Hoang said the Prime Minister has worked with the SBV, the MoIT and the Ministry of Finance (MoF) to ensure enough foreign currency supply for petrol importers and authorized the MoF to iron out snags in petrol business management. – VOV

Tags: Petrol business