State management of fuel sector under the spotlight

Reporter spoke to Petrolimex deputy general director Vuong Thai Dung about recent increases in import duties on fuel products that were aimed at helping to stabilise the market.

What is your assessment of the situation surrounding oil and petrol? Does current State management of oil and petrol prices meet the expectations of enterprises?

Petrol and oil prices are not dependent purely on economies. They’re also dependent on politics. Insecure situations in Egypt and other places in Africa, for example, have directly impacted on oil and petrol prices. For this reason, it is difficult to anticipate oil and petrol prices.

In my opinion, prices must harmonise interests between the State, enterprises and consumers. Both the State and enterprises have compromised their interests to ensure consumer interests in recent years. Thus, when world prices decrease and local enterprises start making a profit, import duties and contributions to the petroleum price stabilisation fund should be raised in anticipation of world price fluctuations. In my opinion, the way the State has managed oil and petrol prices recently has been sensible.

Why is it sensible to raise import duties when fluctuating prices are hard to predict?

They are imported products and the imposition of import taxes is the interest of the State. However, import tax increases or decreases in the meantime have some drawbacks in the context of fluctuating market prices.

Oil and petrol prices are currently under State control and enterprises have no power over price adjustments. The latter are always on the defensive and suffer more losses than anyone if prices are not adjusted in a timely manner.

I think we should increase the petroleum price stabilisation fund while temporarily postponing the imposition of import taxes on kerosene and diesel oil until the market becomes relatively stable. Imposition of import taxes is one measure but it is not as optimal as increasing the petroleum price stabilisation fund. And last but not least, we should think of cutting down oil and petrol prices to consumers if conditions allow us to do so.

How have measures taken by the Ministry of Finance impacted enterprises?

As I already mentioned, the optimal measure is to increase the petroleum price stabilisation fund, then apply import taxes and reduce oil and petrol prices for consumers. However, the State recently raised import duties on some products while increasing contributions to the petroleum price stabilisation fund on others. In this case, I don’t think there has been much impact on enterprises.

You said recent solutions taken by the State to control oil and petrol prices are sensible in the present context. But on their part, consumers believe the way oil and petrol prices are adjusted is unsatisfactory because enterprises are quick to raise prices but slow to cut them. What do you think?

Enterprises have no alternative but to store oil and petrol for at least 30 days to satisfy demand. How could they sufficiently provide oil and petrol to consumers if they did otherwise? We cannot reduce prices when world oil and petrol prices decrease because we cannot throw old products out to buy new ones. It’s not to mention some smaller enterprises import a lot of oil and petrol when world prices reduce.

In my opinion, consumer complaints about quick price increases and slow price reductions are emotional. Enterprises are not allowed to adjust prices automatically. Under the current rulings, price rises may only occur every 20 days at a minimum. There is no limitation in time for price decrease.

Will Petrolimex reduce prices in the time to come?

I want to reiterate that we must import oil and petrol in advance while the State imposes different import taxes depending on world prices. We cannot say everything in advance. We all expect that it is possible to increase import taxes or reduce prices for consumers if world prices continue to fall.

Enterprises keep asking the State to increase prices as world oil and petrol prices soar. Do they automatically propose price reductions?

We have proposed price reductions several times and it is a matter of course that we did not inform everyone every time we increase or reduce oil and petrol prices because such information can have significant negative impacts on consumers. People will speculate on products if they know prices will go up. On the contrary, agents and distributors would not buy oil and petrol if they knew prices would reduce in the coming days which would force them to close their stations and impact customers. – VNS

Tags: Vietnam fuel, Vietnam fuel prices