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Difficulties in stabilising petrol prices
16/2/2011 16:57' Send Print

Apart from different views on how to use the price stabilisation fund, the price management is getting more difficult as the coal, electricity and water supply sectors are asking for an increase of their selling prices.

A positive sign is the decrease of the price of food and foodstuff by 10-20 percent after the Lunar New Year Festival (Tet).

According to a report from the Ministry of Finance, Vietnamese goods accounted for 85-95 percent of the market share during Tet, which created favorouble conditions for the management agencies to control inflation from the first quarter of this year, under the Government’s guidance.

However, many sensitive products are facing price hikes. Petrol is a typical case in point. The question is how petrol price will increase and whether the price stabilisation fund will have any effect.

According to Vuong Thai Dung, Deputy General Director of the Vietnam National Petroleum Corporation (Petrolimex) which holds nearly 70 percent of the domestic petrol market, admitted that many petrol stations have stopped selling as they wait for the adjustment for price increase.

On February 9, the world price of RON92 petrol was priced at US$105.2 per barrel while petrol prices in Vietnam are lower than those in the region by VND 4,000-5,000 per litre. When and how petrol prices will increase, depends on the functional ministries and sectors.

Based on the analysis of the current supply and demand, the Ministry of Industry and Trade and Petrolimex confirmed that there is a sufficient supply of petrol for domestic consumption. Last year, the country consumed a total of 12 million tonnes of petrol. Given this data, how can we stabilise petrol prices?

The Head of the Price Management Department under the Ministry of Finance, Nguyen Tien Thoa said it is impossible for petrol businesses to use the price stabilisation fund to subsidise price differences and thus stabilise the market.

In order to stabilise the petrol prices, management agencies will have to use taxes and fees.

However during Tet, around VND3,500 billion was taken from the price stabilisation fund to adjust domestic petrol prices.

According to the Price Management Department, the fund collected VND4,400 billion and used VND3,505 billion. To stabilise petrol prices during Tet, as of January 15 this year, import tax rates were dropped to 0 percent, equivalent to a deficit of VND8,000-9,000 billion. Consequently, the Ministry of Finance and Petrolimex are in a fix to calculate and use money from the fund.

“We should extract money from the stablisation fund based on the percentage of total revenue of each business. By this way, it will be easier for us to control prices,” Mr Dung said.

Aside from using the price stabilisation fund, businesses can rely on cheaper supply sources from the Dung Quat oil refinery. But Petrolimex assumed that supply sources from Dung Quat account for only 1/6 of the necessary volume. Therefore, this year, Petrolimex plans to sign a contract to buy 2 million tonnes of petrol in a total capacity of 3 million tonnes from Dung Quat, while total consumption demand for the whole year is estimated to surpass more than 12 million tonnes.

Importantly, the prices offered by Dung Quat are as high as market prices.

Stabilising petrol prices in the context of inflation is a thorny problem. Therefore, all management agencies need to jointly consider the actions to avoid the impact of price increase.

Source: VOV News