Two recent petroleum price hikes were based on strict calculation by state management agencies in order to harmonize benefits of enterprises, the government and consumers. The increase of VND500-VND1,000 is appropriate even though it has not yet help petrol wholesalers get rid of losses. Mr Nguyen Tien Thoa, Director of the Price Management Department under the Ministry of Finance had told the press on the sideline of the government’s regular meeting, which was held on July 7 in Hanoi.
What do you think about Vietnam’s recent gasoline adjustments?
The domestic prices are adjusted in line with the petrol prices in the Singapore market within 20 days, which means that we calculate prices of 20 consecutive falling or rising days and then add fees, taxes and commissions to count the average domestic retail prices. These criteria are very clear and specific to calculate the retail prices.
For example, the latest price hike on July 1 is calculated based on the average global oil price in 20 days ranging from June 10 to June 29 when the world gasoline A92 price rose to US$76 per barrel and the price of kerosene soared to US$78.09 per barrel.
Enterprises proposed a price hike of VND500-VND700 per litre of gasoline and by VND1,000 per litre of oil. After consideration, the Ministries of Finance, Industry and Trade defined the price hike was appropriate at that time when petrol traders were losing VND900 per litre of gasoline and nearly VND2,000 per litres of oil.
Moreover, the petrol retail price is operating in line with the market mechanism under the government’s regulation; therefore, administration agencies are only functioned to appraise price adjustment proposals as well as the time of the changes, and enterprises will themselves decide the exact time for the adjustments. These are the reasons why recently we did not hold press conferences on the issue and the new prices were listed on different times of morning, evening and at night.
The current petrol prices in Vietnam are supposedly higher than the world average, what do you think about this?
As far as I know, the gasoline price in the U.S. is $1 per litre, which is still higher than that in Vietnam in accordance with the current USD/VND rate. The retail prices in Vietnam are still lower than those in some Asian countries. The gasoline A92 price of VND14,200 in Vietnam is VND6,500 lower than that in Singapore. The price is set at VND14,906/litre in Thailand, VND16,686/litre in Laos and VND15,376/litre in Cambodia.
Currently, the gasoline price in Vietnam is higher than that in some countries of India and Indonesia where the governments still compensate for petrol traders’ losses. In fact, the gasoline price in Vietnam is close to that in China and is between VND924/litre and VND6,473/litre lower than that in some Asian countries.
Why did the recent petrol price hikes surpass VND500/litre, which is not in accordance with Ministry of Finance’s Circular No. 56/2009/TT-BTC dated on March 23, 2009 on the setup, usage and making balance-sheet of the petrol price stabilization fund?
Under the Circular No. 56, the Ministry of Finance allows petrol traders to raise or slash the retail prices by a maximal of VND500/litre on conditions that the petrol price stabilization fund operates and the fund must be competent to compensate for traders’ losses upon the petrol price hike of over VND500.
However, the global petrol price has been continuously fluctuating since the issuance of the circular; therefore, enterprises are unable to extract part of the retail price for the fund that now has no capital to compensate for traders’ losses.
Before the Ministries of Finance, and Industry and Trade approved petrol wholesalers to raise the retail prices by VND1,000/litre, enterprises had made three price hike proposals that were rejected by the ministries due to inadequacy at that time. The ministries temporarily permitted other solutions including cutting the import tariffs, stopping extracting for the petrol price stabilization fund and extending the deadline for enterprises to refund VND1,000/litre of gasoline to the government’s advance.
However, the petrol price continued to fluctuate in the world market and surpassed enterprises’ bearing. After applying some administrative tools, the Ministries of Finance, and Industry and Trade realized the necessity for flexibility in price regulation in line with the global petrol prices, which is regarded as a provisional and necessary solution. The regulation is in accordance with Clause 1, Article 26 of Decree No. 55/2007/ND-CP.
In order to ensure transparency in price regulation, the Ministry of Finance will amend the Circular 56 in line with the current situation.
Does the Ministry of Finance set a deadline to operate the fund?
In order to operate the petrol price stabilization fund to ensure stable domestic prices upon the sudden mutations of the global prices, consumers will have to bear the extra payment for the petrol prices. The government of Vietnam will no longer subsidize the price. If we did not reach the agreement, the gasoline price in Vietnam would not be VND14,200/litre but be VND14,700/litre due to the extra payment for the fund.
We must wait for the suitable time to extract the payment for the fund because the global prices of gasoline, diesel and kerosene have decreased by only US$2/barrel, equivalent to a fall of only US$0.0125/litre while the price of mazut still stays at US$403/tonnes, up from the earlier average of US$399/tonnes.
Huong Ly
Vietnamese
