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Ministries to loosen control of petrol prices
Petrol distributors will have the power of raising or lowering retail petrol prices in accordance with the world’s prices without having to ask for permission from the Ministries of Finance and Industry and Trade. The state will only intervene if it feels things have gotten out of control.
This is the major change in the draft document being compiled by the Ministries of Finance and Industry and Trade which amends Decree 55 on petroleum price management.
The ministries plan to give more power to petroleum distributors in managing their business and setting retail prices without having to ask for permission. The state will intervene if necessary by releasing documents to urge distributors to adjust retail prices when the world’s price increases or decreases to levels which are higher or lower by 15 percent in comparison with domestic prices.
The draft document says that if the world’s price increases by up to three percent within 10 days, enterprises will have to keep sale prices unchanged. If the world’s price increases or drops by five percent or more within 10 days, enterprises will have the right to adjust retail prices. However, the adjustment levels must not be higher than five percent.
If the world’s price continues to increase or decrease in the subsequent 10 days, enterprises will also be able to apply new sale prices, but each of the price increases or decreases must not be higher than five percent in comparison with the previous price.
The tentative regulations prove to be more flexible than the regulations stipulated in Decree 55.
Decree 55, which has been valid since May 1, 2007, allows enterprises to set retail prices themselves in accordance with market supply and demand. However, enterprises have to submit plans on price adjustment to concerned agencies for approval one week before the price can be adjusted.
The ministries, after reviewing the two years of the implementation of the decree, think that this way of managing petrol pricing is too complicated and has put many difficulties on enterprises.
In late August 2008, when the world’s oil price dropped to the month’s deepest low of $75 per barrel and the Government many times asked enterprises to lower sale prices. However, enterprises ignored the request, reasoning that the world’s prices were not low enough to offset their losses. At that time, the Ministry of Finance had to cite articles of the Pricing Ordinance, forcing enterprises to slash the A92 retail petrol price from 11,800 dong per litre to 11,300 dong.
Most recently, when the world’s price fluctuated for ten days, enterprises three times asked for permission to raise retail prices. However, all three proposals were refused by concerned agencies, which believed that enterprises still could ‘survive’ despite the world’s price increases.
However, as the world’s price kept rising, concerned agencies finally gave the nod to price increases.
However, the problem is that the decisions on raising petrol prices always come late: It often happens that right after the ministries approve domestic price increases, the world’s price begins decreasing.
Some economists have criticised the currently applied mechanism on petroleum retail price management and criticised the latest decision by the ministries to allow distributors to raise retail prices, saying that the decision has made Vietnam’s petrol price higher than many regional countries.
However, Nguyen Tien Thoa, Head of the Price Control Agency under the Ministry of Finance, has denied the fact that Vietnam’s petrol price is higher than that of other regional countries.
Thoa said that though the petrol price has been raised five times so far this year, Vietnam’s retail price is just approximate to that of China, while it is 924 dong to 6,473 dong per litre lower than the prices of regional countries.
Thoa said that A92 petrol is selling at 14,200 dong per litre in Vietnam, while it is 20,672 dong per litre in Singapore, 14,906 dong in Thailand, 16,686 dong in Laos and 15,376 dong in Cambodia.
vietnamnet, vneconomy
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