Vietnam fuel companies don’t have total pricing freedom

Vietnamese fuel traders have been given more autonomy in adjusting prices based on market supply and demand, but the government will continue to oversee their pricing, an official said Wednesday.

“It’s not correct to say the government has given fuel companies the right to set prices on their own,” Deputy Industry and Trade Minister Nguyen Cam Tu said. “Fuel companies are only allowed to decide prices to a certain extent.”

Since December 15 last year, the government has allowed fuel traders to raise pump prices automatically without seeking government consent if world prices rise by seven percent or more.

Tu’s comment on Wednesday was in response to a question as to why, after the deregulation, the Finance Ministry this week still asked fuel traders to temporarily halt all price hikes to control inflation.

Fuel traders last month increased gasoline pump prices by VND590 per liter, the second hike this year. Vietnam’s top oil product importer and distributor Petrolimex on Monday said the firm was still incurring a loss of VND699 on every liter of gasoline.

Vu Dinh Anh, deputy head of the Ministry of Finance’s Institute for Market and Price, told Thanh Nien the deregulation was not practical in the current situation.

“Fuel is a sensitive product and has an important role in the macro-economic balance,” he said. “The government needs to control fuel prices by setting a price cap. Then fuel traders will compete with each other and try to lower their prices, instead of raising them continuously.”

Economist Nguyen Quang A said the Ministry of Finance’s order to halt price hikes is only a “provisional solution”, when there is still not healthy competition on the market.

“There are 11 fuel traders in the country and the competition can be tough. But in fact Petrolimex alone holds 60 percent of the market and all of its activities strongly influence the market.”

In the long term the government should break down state-owned Petrolimex’s market share and allow the other ten companies to be grouped into two large traders, A said.

“When there are three companies that are equally large and hold 30-40 percent market share each, the government no longer has to intervene in the market. It only needs to make sure the three traders don’t join forces to raise prices.”

Pump prices will be kept from rising at least until the end of this month, Director of the Department of Price Management at the Ministry of Finance, Nguyen Tien Thoa, was quoted as saying by local news website VnExpress Wednesday.

He said if world fuel prices surge too high, the government will take necessary measures to help local traders but cutting taxes or using a state fund reserved for stabilizing prices.

VietNamNet/TN

Tags: Vietnam fuel prices, Vietnam oil and gas