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Ministries argue over fuel price management
The Ministry of Industry and Trade has blamed the Ministry of Finance for exacerbating oil distributors’ losses by first cutting fuel prices and then refusing to hike them, but the latter has rejected this saying distributors are still making profits.
At a conference on fuel price management held in Hanoi Tuesday, Nguyen Loc An, deputy head of the Ministry of Industry and Trade’s Domestic Market Department, criticized the finance ministry’s decision to cut retail prices in late August.
It had earlier ignored his ministry’s recommendation to cut fuel prices on July 8 when global prices slumped but “imposed the cut on August 26 when wholesalers were making losses. This is incomprehensible.”
But Minister of Finance Vuong Dinh Hue rejected it out of hand: the wholesalers were making profits at the time of the cut; the chairman of Petrolimex, whom he had consulted before announcing the decision, had given the green light; and the price cuts were completely in accordance with regulations and market developments.
Besides, he was willing to take personal responsibility for the decision, he said.
The wholesalers claimed to be making losses but customs data showed that they were earning a profit of VND780 per liter, he revealed.
Deputy Minister of Industry and Trade Nguyen Cam Tu attacked the finance ministry saying, “[the ministry] is managing prices without any aims or targets. “Their method is to keep prices stable regardless of distributors’ losses.”
The ministry had failed to cut or hike prices at appropriate times, and made price adjustments without a clear rationale, he said. “We will never be able to resolve any problem if we do not address the root cause: that fuel wholesalers are incurring massive losses. “We have to gradually hike prices.”
Bui Ngoc Bao, chairman of the Vietnam National Petroleum Corporation (or Petrolimex), the country’s largest fuel wholesaler, blamed the Ministry of Finance for the losses his company had suffered.
Petrolimex posted a loss of VND1.8 trillion (US$90 million) in the first eight months of this year while the figure for September alone was expected to be VND200 billion, he said. “The Ministry of Finance should consider easing distributors’ losses.”
Le Xuan Trinh, deputy CEO of PetroVietnam Oil, said the distributors’ losses were not due to their inefficiency. “It is the management mechanism that causes the losses.”
Hue said the price cut has would help combat inflation as well as reduce lending rates. “There will be no more fuel price hike this year,” he declared. “If any fuel wholesaler may not be able to ensure supply and wants to withdraw from the market because of losses, just let the Ministry of Finance know.”
The ministry was willing to dissolve even Petrolimex, which has more than 60 percent of the market, if the giant distributor was unwilling to toe the price line, he warned.
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