The Ministry of Industry and Trade (MOIT) thinks that the petroleum product pricing mechanism has become inextricable due to the unreasonable pricing management by the Ministry of Finance (MOF). In reply, MOF argues that it takes responsibility about the price control before the public, and that if enterprises continue incurring loss, they should leave the market.
The workshop on the petroleum products’ price management in accordance with the market rules held on September 20, which gathered 20 leading experts and press agencies, turned out to be the forum for the representatives from MOF and MOIT to argue about the pricing mechanism.
MOIT and MOF are the two ministries which make decisions on the issues relating to the petroleum prices. MOIT is in charge of controlling enterprises and ensuring stable supply, while MOF is in charge of regulating the prices and designing tax policies.
Deputy Minister of Industry and Trade, Nguyen Cam Tu, was not listed among the speaker panel. However, Tu still decided to take the floor because he said he could not compress his dissatisfaction.
Tu said that the way MOF has been following to regulate the petroleum products’ prices just comprises of “half-way measures“, which cannot be seen as a subsidization mechanism, nor a market-based mechanism. According to him, the key problem lies in the fact that MOF still cannot clearly define the priority goal: Vietnam should prioritize the energy security or the price subsidization?
Tu believes that the government wants to ensure sufficient supply everywhere and at any times, which means that the energy security must be put on the top priority.
However, it seems that MOF has been regulating the petroleum products’ prices in accordance with the principle of “blindman’s buff”. The ministry did not dare to allow enterprises to raise the retail prices, even though the prices skyrocketed in the world market, which made domestic distributors incur heavy losses because they were forced to sell products at the prices below the production costs.
Tu said that MOF shrinks every time when local newspapers complain about the price increases and criticize petroleum distributors of unreasonably raise the retail prices.
“As a result, the management agency (MOIT) becomes disreputable, while enterprises have been criticized for complaining about loss all the time,” Tu said.
“We are regulating the petroleum prices based on the “non-interference” principle. We are using our hands and legs instead of our heads. As a result, we are criticized by seniors, abused by local newspapers, while in the eyes of people, we are just like a crime,” he continued.
He went on to say that MOF has been regulating the petroleum prices based on the public opinions, not on the market performance and the supply-demand basis. Therefore, all the important indicators about the supply-demand balancing, the business performance of enterprises and the illegal exports have been ignored.
“I feel ashamed because I made too many promises, but I could not help them ease losses, even though I still always ask them to ensure sufficient supply,” he added.
He has warned that if MOF refuses to regulate the petroleum prices in accordance with the market rules, and does not help enterprises settle their losses, it may happen that the distribution network would be broken and the supply would be interrupted.
“I know that people heap abuse on us, enterprises also insult us, but I have to bear the insult, because this is the only thing I can do now,” Tu said.
Bui Ngoc Bao, General Director of Petrolimex, which is holding 60 percent of the market share, confirmed that the sale prices have always been lower than the import prices; therefore, Petrolimex has been incurring loss for a long time. By the end of August, Petrolimex had incurred the loss of 1800 billion dong, while the figure may rise to 2000 billion dong by the end of September.
Petroleum distributors voiced the same complaint that MOF made an unreasonable decision to ease the retail price by 500 dong per liter in late August, because the decision was made at the time when the world’s oil price increased again.
In reply, Minister of Finance Vuong Dinh Hue said he made the decision on easing the petrol price by 500 dong after considering the law and the market performance.
Hue, who has taken the post of Minister of Finance after leaving the State Audit, said that he well understands the profits and losses of enterprises.
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