Adjusting petrol prices according to market mechanism

19-Aug-2020 Intellasia | Nhan Dan | 7:03 AM Print This Post

Petrol enterprises and the Vietnam Petroleum Association (VINPA) has proposed the government soon abolish the Petrol Price Stabilisation Fund so that the prices of petrol will operate according to the market mechanism and gradually approach world prices.

The proposal was made when they contributed their comments to the draft Decree on the amendment and supplement to government Decree No.83/2014/NĐ-CP on petrol trading.

According to VINPA, the implementation of government Decree No.83/2014/NĐ-CP on petrol trading has revealed many shortcomings and inadequacies that need to be addressed.

It is necessary to modify the formula for calculating the base price of petrol to reflect reality and amend the regulations related to business conditions and the petrol distribution system in addition to completing the price management mechanism.

In particular, the government needs to consider the elimination of the Petrol Price Stabilisation Fund because consumers are suffering losses due to the fund but not benefits.

The Ministry of Industry and Trade said that the fund should be kept as a tool to stabilise petrol prices and intervene in the market when necessary, but, the use of the fund has “distorted” the petrol market and has not ensured fair competition in accordance with market mechanisms.

It can’t be denied that in recent years, the Petrol Price Stabilisation Fund has contributed to stabilising the domestic petrol market and reducing external impacts on domestic prices. The establishment and use of the fund as a regulatory tool to ensure harmony of interests between parties is necessary when enterprises’ capacity to forecast fluctuations of petrol prices on the world market is not good and their levels of competitiveness are not high.

However, the structure of the fund is rigid and passive and the use of the fund is not transparent, causing frustrations for the people.

It is a paradox that when petrol prices fall, people still have to buy petrol at high prices because money is taken from petrol buyers to contribute to the fund. Customers have to pay money in advance to contribute to the fund to stabilise petrol prices but it is not clear whether they benefit from the fund or not.

Meanwhile, when petrol prices go down, petrol enterprises extract money from selling prices to add to the fund, but the contributions to the fund and the deduction from the fund when prices increase is not balanced.

Enterprises that sell a large volume of petrol can contribute a large amount of money to the fund while enterprises that sell a small amount of petrol will contribute less to the fund.

Thus, when petrol prices rise, enterprises with a small fund will face difficulties and they often do not dare to sell a lot because they are afraid of having to compensate for large losses.

The Petrol Price Stabilisation Fund takes money from petrol consumers to stabilise the prices so that consumers can buy petrol at stable prices because of the money they paid in advance but not by third-party intervention.

The extraction of VND300 per litre of petrol to contribute to the fund is causing consumers to suffer a negative fund of hundreds of billions of dong.

It is time to abolish the Petrol Price Stabilisation Fund so that the prices and trading of petrol will operate according to the market mechanism and gradually approach world prices.

At the time of the establishment of the fund, the domestic petrol market was mainly dependent on imports. To date, Vietnam has two oil refineries including Dung Quat and Nghi Son which are now put into stable operation, meeting 75 percent of the market demand of petrol. Therefore, the elimination of the Petrol Price Stabilisation Fund is the right thing to do so that petrol prices will move according to market rules and mechanisms.

In addition, inappropriate regulations should be amended so that more traders can participate in importing and distributing petrol as well as creating fair competition between enterprises to ensure the rights of consumers.

https://en.nhandan.org.vn/business/item/8983902-adjusting-petrol-prices-according-to-market-mechanism.html

 

Category: Economy, Vietnam

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