Fuel prices should have been hiked earlier, says finance minister
23-JUL-2008 Intellasia | VnExpress
Jul 23, 2008 - 7:00:00 AM
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From 10am on July 21, the finance ministry announced that the price of A92 petrol was raised to 19,000 dong a litre from 14,500 dong, that of kerosene was up to 20,000 dong/litre, and diesel to 15,950 dong/litre.
At the press meeting held yesterday, the finance minister Vu Van Ninh spoke that the adjustment of fuel retail prices should be increased more early with a higher rise because fuel traders had to suffer too big losses.
Does the anti-inflation combat remain to be the government's high priority given goal?
Form now to the end of the year and even 2009, the anti-inflation combat will still be the high priority given target of the government. In the past time, Vietnam had to be under strong affects from the world market, such as highly soaring prices of input materials and sudden changes in the global economy. But the government still kept promising that there is not be to raise prices of so-called non-essential commodities until the end of last month.
However, in the first half of July, the world's oil price continued increasing and some times jumped to the US$150 a barrel threshold. Import companies had to face severe losses while the state budget could not subsidise fuel prices any more. If continues restricting retail prices of fuel, the state budget will have to counter with unforeseeable difficulties because the whole earnings of about 40 trillion dong from crude oil exports have been used for compensation and funds for social security will run out. Meanwhile, petroleum smuggling through cross borders will continue surging due to Vietnam's fuel price remains lower than other regional countries'. In such a situation, this adjustment in domestic prices of fuel is very significant and unavoidable. Factually, the current increase in fuel prices is quite modest. If comparing import prices, petroleum trading companies still lost about one trillion dong. The adjustment, according to our opinion, is too late against the practical market. Fuel prices in the domestic market should be increased more early with a higher rise because petroleum importers are seeing prolonged losses.
How will petroleum retail prices affect to CPI?
As estimated, the CPI will rise by 0.5-0.7% from the direct affects of fuel prices. However, indirect impacts could push CPI to a higher level. Therefore, the government will carry out a series of tougher measures to curb inflation, such as reduce costs, control import prices of oil, and call for fuel savings. Anti-inflation task in the rest of this year is fairly heavy.
How about impacts on production of other sectors?
Petroleum is input material of all sectors so most production facilities and people's life absolutely will be influenced by the increase in fuel prices. When building up the adjustments plan, we [finance ministry] calculated carefully the influences to offer the most suitable price. In addition, the government also ordered relevant ministers to control input of enterprises to minimise unnecessary costs. As for state controlled commodities including electricity, clean water, bus service, the government will maintain stable prices from now to the end of December 2008. Particularly coal prices will be under suitable plans in each period.
It is forecasted that the global oil price could be US$300 a barrel. So do the ministries draft plan for the bad case?
We always follow up occurrence of the domestic market and have standby plans to counter with different oil prices. In this adjustment, we also had to select one among tens of previously proposed plans to ensure the goal that enterprises and people co-share heavy burden with the state. These plans are built based on the volume of crude oil for exports, import of finished oil and the state's collection and spending. Statistics from the finance ministry showed that in the first half, big oil importers lost 14.525 trillion dong respectively excluding the remaining loss of 2007 of 7.4 trillion dong. Between now to the year end, if not increase fuel retail prices, they will lose extra 44.772 trillion dong. As a result, the whole year's loss could be 59.519 trillion dong (calculated based on the world's oil price at US$139 a barrel). The ministry predicted, in last half of this year, the global oil price will fluctuate around US$145-150 a barrel, so the loss of big petroleum importers in 2008 could be 67-72 trillion dong while the state budget's tax collection will reduce by 25 trillion dong because of tariff exemption for petroleum imports. Due to this, the state will have no tax collection from petroleum to carry out social security activities. If not increase fuel prices, the spreading subsidisation will continue to occur and create conditions for petroleum smuggling via cross borders because Cambodia's fuel price now is 23,253 dong a litre, higher 7,000-8,000 dong/litre as compared with Vietnam's, Thailand's at 20,220 dong, Laos' 19,040 dong.
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