Petroleum Traders Able to Fix Price within Smaller Range

The Ministry of Industry and Trade has reported to the Prime Minister on reviews and proposals for amendments to Decree 84 on the petroleum business. The ministry suggested amending the petroleum pricing mechanism under which predefined profit would be separated from base prices and selling prices would be changed immediately when base prices rise by 3 per cent, 5 per cent or 7 per cent (instead of 7 per cent, 12 per cent and over 12 per cent as now). It also suggested the degree of price changes when the difference between base prices and current prices reaches specific values. For example, if the difference is up to VND500 per litre or kilogramme, traders will make changes on their own; if the difference ranges between VND500 and VND1,000 per litre or kilogramme, they will adjust the price in combination with the Price Stabilisation Fund; if the difference is above VND1,000 per litre or kilogramme, they must seek the approval from the Ministry of Finance and the Ministry of Industry and Trade.

 

The two ministries are divided in the time between two latest price changes. The Ministry of Finance proposed three time plans for base price calculation (10 days as now, 30 days to match the reserve duration, and 15 days to match the reserve duration and the frequency of price changes) and it advocated the third plan. However, according to the Ministry of Industry and Trade, the duration between the two latest price changes should be decided by the Prime Minister in order to enhance flexibility, rather than by the Government.

 

The ministry said regulations on the predefined cost of VND600 per litre (VND400 for fuel oil) and the predefined profit of VND300 per litre are out of date. The degree of remunerations and commissions to agents and general agents need to be clearly and closely defined in this decree, it said.

 

As Decree 84 does not define the mechanism on disclosure of the computing of base prices, the use of Price Stabilisation Fund, and the auditing of wholesale traders, the Ministry of Industry and Trade proposed that the new ruling stipulate the disclosure of base prices on the websites of the Ministry of Finance and wholesale traders, as well as methods and mechanisms on the disclosure of base prices, pricing basis, provisions for Price Stabilisation Fund, and business performances of wholesale traders.

 

The revision of Decree 84 is said not to resolve the existing setback of pricing mechanism. With exclusive rights to traders, the amended ruling still lets traders to decide on prices, although the ranges are narrowed from the current levels.