In June and July 2012, consumer price index (CPI) dipped but prices of electricity, petroleum and gas kept growing up in Vietnam. This move is said to be contrary to a number of policies aimed at supporting businesses to swim out of troubled waters. Mr Vo Van Quyen, Director of Market Department under the Ministry of Industry and Trade talks about this matter.
While companies in Vietnam are facing with numerous difficulties, the Ministry of Finance and the Ministry of Industry and Trade granted a permit to sellers of key commodities like petroleum and electricity to hike prices. Do you think this move conflicts with ongoing business bailout policies adopted by the Government?
I would like to assert that there is no contradiction between the rise in prices of essential goods with the business bailout policy. All regulatory documents of the government agreed on market-based pricing mechanism. However, some essential commodities like coal, petroleum and electricity whose price changes affect the masses will be imposed market mechanism step by step with specific roadmaps.
The government advocated applying the market mechanism to petroleum product pricing since 2009. In 2011, the volatility of world oil prices and the surge of inflation forced the government to intervene in domestic oil prices, thus temporarily breaking market mechanism rules. Recently, the government allowed the continuation of market-based pricing mechanism on this commodity. Although the intervention of the government reduces, regulatory tools still exist, including tax and fees for price stabilisation. Price movement of gas price caused no distress because it was already subjected to market price.
It is said that CPI drops in the past two months provide a condition for suppliers of essential goods to hike prices. What is the standpoint of the Ministry of Industry and Trade on this matter?
At present, gasoline price is governed by the market mechanism. With heavy reliance on foreign supplies, retail prices will go up if global prices are higher, and vice versa. However, this is a special commodity as it is an input for many economic sectors, and the government will still keep control. Price changes must be made reasonably.
The electricity price hike on July 1 was stemmed the real demand. In fact, in late November 2011, the Ministry of Industry and Trade and the Ministry of Finance proposing a more than 10 percent increase in power price. However, after weighing up and down its effects, the prices were added 5 percent in the two latest adjustments (December 20, 2011 and July 1, 2012). Or, electricity price incremented 5 percent each.
Whenever the power price is changed, the Ministry of Industry and Trade always calculates to cause least impact on the poor. As for manufacturing businesses like cement and steel producers, electricity price change causes little effect on their production costs. So, there is no reason for the price hike when CPI slump and vice versa.
According to experts, to keep prices more stable, the Ministry of Industry and Trade should stop taking money from petroleum sold for price stabilisation fund and reduce import duties. What is your opinion about this?
For the time being, gasoline business is being subjected to market mechanism and sellers are obliged to extract VND500 on each litre sold for the price stabilisation fund. If we repeatedly intervene in companies’ business operations, there will be no market mechanisms at all.
Therefore, at the latest petrol price rise, the Ministry of Finance and the Ministry of Industry and Trade saw that the State should only intervene with tax instruments or allow extraction for the price stabilisation fund in a certain context. This is a method to let gasoline prices to move in tune with market developments. The government will reduce its intervention if socioeconomic situation is better.
KTDT
Vietnamese
