Petrol Price Hike Hits All Industries & Businesses

Petrol Price Hike Hits All Industries & Businesses

 

The latest adjustment in the prices of petroleum products in Vietnam by the Ministry of Finance on July 3 would raise the production cost of many domestic commodities, local media said.

The current change in FO (fuel oil) price of 17.5 per cent will push production costs of the garment and textiles industry up from 2 per cent to 2.35 per cent, which will place much pressure on the local industry as the price of world garment and textile products are currently on a downward trend, according to chairman of the Vietnam Garment and Textile Association Le Quoc An.

Vietnamese garment and textiles will therefore face fiercer competition from cheaper Chinese products, he also said.

Head of the Business Department of the Vietnam Steel Corporation, Dang Ngoc Minh, also said production of a ton of steel needs 30-40 liters of FO, so that the hike will raise the production cost of a ton of steel by VND20,000-30,000 (US$1.26-US$1.89).

The coal industry will also be severely hit by the increase of petroleum prices because petroleum products account for 30 per cent of total production costs.

According to the Vietnam Coal Corporation, the corporation needs 210 million liters of diesel oil and six million liters of petrol 92 for coal production in 2005, with 105 million liters of diesel oil and three million liters of petrol 92 in the six remaining months.

The electricity industry, meanwhile, will use over 312,000 tons of FO and 201,701 tons of diesel oil. With the second increase in petrol prices, the production cost for electricity generation would rise by VND209.5 billion (US$13.25 million). 

According to calculations by the Finance Ministry, petrol price hikes will raise the price of cement by 10 per cent, offshore fishing by 9 per cent, transportation by 2.82 per cent-5.72 per cent, paper by 1.75 per cent, electricity by 1.3 per cent, and agricultural products by 0.1 per cent-1 per cent.

The prices of products on the market would climb up and the inflation rate would be higher, resulting in the country’s consumer price index going up and affecting the people’s life, said deputy head of the ministry’s Price Research Institute Ngo Tri Long.

Deputy Finance Minister Tran Van Ta emphasized that the second hike was urgent to narrow the gap with regional countries and limit illegal export of petrol through border gates. According to local media, about 30,000-40,000 liters of petroleum products are sent to Cambodia through a border in Long An province per day. The rampant illegal exports also happen in northern Cao Bang province and southernmost Kien Giang province.

The Finance Ministry said the increase also aims to reduce State subsidy for petroleum imports. Since the beginning of the year, the government has had to compensate around VND6.45 trillion (US$408.2 million). Without the second price hike, the country must compensate VND9,324 billion (US$590 million) in the six remaining months. 

Vietnam has to import nearly all petroleum products to feed the national energy demands because it lacks refining facilities. It imported over 5.9 million tons of petroleum products worth more than US$2.3 billion in the first half of this year, according to the government source.

The Vietnamese government raised the prices of petroleum products for the first time this year in March.

• T.V