Vietnam seeks proper price regulations for petrol

Vietnam’s petroleum pricing system was the main issue during a recent meeting between Government officials and big oil companies.

Bad management

Nguyen Loc An, Deputy Director of the Ministry of Industry and Trade’s (MoIT) Domestic Market Department criticised the Ministry of Finance’s (MoF) decision to lower petroleum prices this August.

According to An, the price cut makes no sense.

Deputy Minister of Industry and Trade Nguyen Cam Tu said the MoF’s petrol price management is based solely on public opinion, and does not take into account the need for a stable petroleum supply.

“The recent regulations on petrol prices was a combination of a market and subsidy mechanism. The MoF did not define its goal of ensuring national energy security or subsidising petrol prices. Also, it failed to address the matter of compensating petrol firms for their losses. If this continues, it could pose a threat to the stability of the nation’s fuel supply,” Tu warned.

Bui Ngoc Bao, General Director of the state-owned Vietnam National Petroleum Corp (Petrolimex), agreed, suggesting that the MoF compensate petroleum firms for their losses, because they joined the Government’s petrol price stabilisation programme.

He said that by the end of August, Petrolimex had mounted up losses of VND1.8 trillion (USD86.4 million). They expect to lose VND200 billion (USD9.6 million) in September, which would increase the total loss for the year so far to around VND2 trillion (USD90 million).

Le Xuan Trinh, Deputy General Director of PetroVietnam Oil Corp (PV Oil) proposed the MoF to float petrol prices on the world market.

Meanwhile, Minister of Finance Vuong Dinh Hue said, “From now to the end of the year, there would be no rise in petrol prices. The Government will apply measures to stabilise the domestic market, which would include compensation for companies who have lost money.”

False losses

According to Hue, there have been several cases where oil companies claim losses, even while making profits.

“When the MoF required a gasoline price cut of VND500 in late August this year, Petrolimex was making a profit of VND780 per litre but still complained about that it was losing money. The whole thing was fake,” he emphasised.

According to Hue, since the recent petrol price cut, the MoF has yet to receive any proposals from petrol firms on the verge of going out of business.

“If any petrol firms find their businesses unprofitable we will allow them to cease operations, the Government will approve. However they should not make any threats,” he noted.

He shared that now is not the right time for the country to float petrol prices, because the world market is unstable.

Many experts at the meeting were of the mindset that petrol price regulations should take into account both petrol firms and the income of the population. They said that it is not practical to compare prices in Vietnam with those of Singapore or Thailand.

Hue said that any decisions should take into account the interests of the nation, as a price rise could further drive up inflation.

He concluded that the Government is responsible for making management policies, while petrol firms have a responsibility to provide accurate information. “Price hikes are only applied when they are unavoidable,” he noted.

The MoF plans to require firms to make detailed reports of their profits and losses since the beginning of the year, especially for the period of January and August 25 when the ministry demanded a price cut. The results will be used to calculate petrol firms’ contribution to the price stabilisation fund.

Tags: Vietnam petrol, Vietnam Petrol prices