Fuel dealers to blame for losses

Fuel wholesalers would all be profitable if they had followed regulations and stuck to offering a commission of only VND600 per litre to dealers, said Deputy Minister of Finance (MoF) Vu Thi Mai.

Mai made the statement at a press briefing held yesterday to report the results of investigations at four wholesale fuel companies including the Viet Nam National Petroleum Corporation (Petrolimex), PetroVietnam Oil Corporation, Sai Gon Petro Co Ltd and Dong Thap Petroleum Trading Co Ltd (Petimex).

Audit reports revealed that petrol and gas wholesale companies had given their fuel dealers excessively high commissions.

Petrolimex reported a loss of VND1.84 trillion (US$87.6 million) between March and September but the audit revealed that VND522 billion ($24.8 million) of the loss could be accounted for in commissions for fuel dealers, so the real loss was only VND1.3 trillion ($62 million).

PVOil paid the highest commission level of VND900 per litre among the companies and the rate reached VND860 per litre at Petimex.

The Ministry of Industry and Trade (MoIT) had removed limits on the commission level, leaving petrol companies the opportunity to negotiate the rates themselves which resulted in unhealthy competition among wholesalers and dealers, said Mai.

She raised concerns about the high commission level while consumers were dealing with rising prices.

“The companies should have minimised their costs but instead they offered higher commissions to fuel dealers to gain market share, so they did not share in the difficulties of the Government and people,” she said.

She referenced Circular No 234 which stipulates that business costs were the basis for prime prices which included a commission of VND600 per litre for fuel dealers.

“We should have clearer regulations on commissions for dealers because the commissions have created complexity in the petroleum retail market. In addition, no standard has been set for Government management,” she said.

Nguyen Hong Hai, deputy head of the MoF’s Finance Business Department said the investigations showed that the ministry’s decision to reduce petrol and gasoline retail prices in August was reasonable.

The audit revealed that except for Petimex, which imported petroleum at a high price early in the year, all the companies had enjoyed profits despite reporting losses.

Specifically, Petrolimex enjoyed VND130 billion ($6.2 million) in profits while Sai Gon Petro gained VND48 billion in profits though it reported VND44.6 billion ($2.1 million) in losses during the period.

Hai also said that use of the petroleum price stabilisation fund at petrol companies had helped save costs and helped stabilise retail prices. A balance of VND115 billion ($5.5 million) still remains in the fund.

However, he said shortcomings remained in the utilisation and management of the fund.

He suggested that management agencies should research methods to renew the fund management mechanism and that the ministry should manage the fund.

“We should also consider adjusting the allowable time for increasing or reducing retail prices to coincide with petrol company imports,” he said.

He also asked the companies to develop plans for withdrawing investments out of non-core businesses such as the real estate, finance and banking sectors.

The MoIT asked petrol wholesalers to work with relevant agencies to ensure the balance of foreign exchange according to the State Bank of Viet Nam’s exchange rate to avoid losses due to forex fluctuations. About 69 per cent of the country’s petroleum is imported.

In September, the MoF established teams to audit prices set by these distributors between January 1 and September 15, 2011, relative to their expenses and trading volumes after the petrol dealers complained of huge losses.

Source VNS

Tags: Vietnam fuel, Vietnam fuel prices