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Market forces help control petrol prices
A new decree on oil and petrol trade management will take effect next month amid debates whether it is a good time to float petrol prices.
Decree 84/2009/ND-CP, released on October 15, 2009 to replace Decree 55/2007/ND-CP, stipulates that petrol prices will follow market fluctuations, with government intervention only in special circumstances. Petrol price adjustments by enterprises will be based on state regulations.
The new decree, to take effect on December 12, gives petrol traders the right to increase selling prices if input costs rise 7 per cent over retail prices. However, the state will still control the time between consecutive price increases, mandating at least 10 days compared to the 20 days in Decree 55.
Vu The Bang, former chief Petrolimex Secretariat, said it was time to let the oil sector experience market effects.
“The floatation of petrol prices will exactly reflect the social costs for oil products. If the state continues to subsidise oil prices, many enterprises trading in oil and petrol will think they are engaged in lucrative business despite the fact that they are being subsidised by the state budget,” said Bang.
“Once businesses can define selling prices themselves, they will have to compete with each other to attract more customers. The fierce competition will lead to lower selling prices and higher product quality and customers will be the beneficiaries,” said Bui Ngoc Bao, deputy director general of Petrolimex.
Meanwhile, experts remain cautious when talking about the impact of the new policy. Nguyen Thi Hanh, general director of Saigon Co.op, said floating prices would impact on goods prices directly.
“Floating prices is not suitable at this moment,” Hanh said, pointing to the difficulties the economy still hd to face. Vo Tri Thanh, deputy director of the Central Institute for Economic Management said: “Giving enterprises the autonomy to determine prices is something many regional countries have done. However, it is necessary to consider whether or not it is the right time to do this in Vietnam.”
He explained that price floating should be implemented only when fair competition, information transparency and effective state regulations of the market were all in place.
“The market does not meet the three conditions,” Thanh said.
Currently, Petrolimex holds a controlling market share of more than 60 per cent.
vietnamnet, vir
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