Watchdog agencies powerless in controlling gas prices

The retail price of gas is always 30 percent higher than the actual value, because the products have to go through many middlemen before reaching out to consumers. However, no proper solution has been found to settle the problem.

Gas importers now only “take care” for sales agents by offering sky high commissions, while they do not think that they should act for the benefits of consumers.

Consumers incur double loss

The gas price in the world has dropped sharply by 60 dollars per ton in comparison with early August to 800 dollars per ton. Consumers hoped that the retail price would decrease by 20,000 dong per 12 kilo tank. However, gas firms did not lower the retail prices; they just offered higher commissions to sales agents to boost sales.

Explaining this, Le Thi Anh Man, Deputy General Director of Saigoin Petro, said that the world price is released once every month, at the beginning of the month, applied to the clients who register long term contracts, and valid for the whole month.

In fact, the importers, who sign the contracts on importing separated consignments of products, have been able to import products at lower prices. However, the importers would still have to wait for a couple of weeks to get deliveries, and they cannot lower the retail prices right now.

Besides, Man said, the world’s prices always fluctuate all the time: they go up today and go down tomorrow.

Nguyen Si Thang, Chair of the Vietnam Gas Association, said that gas trading firms decide not to lower the retail prices, but offer higher commissions, because they want to boost sales and compete with rivals.

If gas suppliers lower the retail prices now, sales agents would not take products in big quantities. They would order products in small quantities and wait for the prices to drop. Meanwhile, gas importers want to boost sales and clear stocks as soon as possible. If the imports are left unsold, gas importers would incur big losses.

A director of a gas trading company in HCM City also said that as there are too many intermediaries in the gas distribution chain (general sales agent, second class and third class sales agents, retail points), the expenses on intermediaries prove to be too big. The average discount rate sales agents can enjoy is about 80,000-100,000 dong per 12 kilo tank, which is equal to 30 percent of the gas tank price (the retail price now is 360,000-396,000 dong per 12 kilo tank.

Sales agent system makes market chaotic

The HCM City has stopped granting new licenses to sales agents in the city, in a plan to restructure the business facilities for gas trading. The problem is that the restructuring has not been completed over the last six years.

According to the HCM City Department for Industry and Trade, on paper, there are 1700 gas trading shops, but in reality, the figure is just 1500.

The interruption in licensing gas sales agents for a long time has accidentally caused the unhealthy competition. Meanwhile, gas trading firms have been mushrooming. Therefore, in order to make profits, gas firms have to offer high commissions to their sales agents, or the sales agents would shift to distribute the products from the suppliers who offer higher commissions.

Before 2005, the discount rates offered by suppliers to sales agents were just 8000-9000 dong per tank, while the rate has soared to 100,000 dong. Of course, consumers are the biggest sufferers.

The long interruption period has also led to the boom of license trading. The price of gas trading license has been increasing year after year. In order to obtain a license for a shop in suburb areas, one would have to pay 50-60 million dong, while the price could be up to 80-100 million dong.

Tags: Vietnam gas, Vietnam Gas prices