Poor management of petrol industry stirring public opinion

Published: 11/02/2009 05:00



LookAtVietnam – Vu Dinh Anh, Deputy Director of the Institute for Market & Price - Ministry of Finance - spoke with Viet Nam News about management and transparency in the petrol industry.

Petrolimex’s reaction to the new decision has taught us that we need a more appropriate mechanism to manage the petrol business, especially the framework for price reduction.

The reduction of the import tax from 40 per cent to 25 per cent is significant. This cut seems to have been brought about due to pressure from petrol enterprises, who have claimed losses.

However, we don’t really know, if they are losing or gaining profit. Petrol enterprises report directly to the Government, not to the public. The public does not have access to profit information about the petrol industry.

The diesel price cut was very sudden. The decision came into effect at 10pm on Monday. The media has claimed the decision was made after working hours. Is it necessary to rush into it like that? Besides making petrol enterprises business reports public, the Government’s management also needs to strive for transparency and predictability. I don’t think it needs to be so sudden.

Was this the reason behind Petrolimex’s reaction? They didn’t apply the new price until the next morning, after much media coverage.

They were actually well within the rules of Decree 55/2007 and the current petrol business management mechanism. At the moment, we only have the framework for raising the price, not for reducing it. In fact, there has not been a pattern of reducing the price in the petrol business. Our market is a near monopoly, with Petrolimex making up more than 60 per cent, and petrol is an essential product. Petrolimex’s reaction to the new decision has taught us that we need a more appropriate mechanism to manage the petrol business, especially the framework for price reduction.

In your opinion, will Petrolimex’s reaction have a negative effect on the image of the Government’s management, as well as on the petrol business?

Indeed, Petrolimex’s reaction only highlights the inadequacies in our management mechanism; they are no longer just theory, but reality. In a way, it looks like the Government’s management is going against the mechanism it created.

On the other hand, I don’t think the reaction will make the petrol business look any worse, because a VND500 per litre price cut, is not enough to stir up the public. However, the public already has weak trust in the petrol business due to the industry’s tendency to keep their business secret.

Petrol is a special product and plays an important role in economy. Do you think it is essential to make its business affairs public in the same way other industry’s must?

It is very important to make the industry’s business activities public. This would clear the air around the industry. But more importantly, it would guarantee fairness among all industries, because petrol makes up a large ratio of business expenses. Transparency would also make the public look at the petrol industry as a normal business.

Now that the diesel price has been cut, should the public be optimistic and hope for a gasoline price cut as well? Especially now that the global oil price is stable (about $40 per barrel)?

We are completely dependent on imported oil, therefore our market price totally depends on global price fluctuations. Of course, the global price is impossible to forecast. On the other hand, we don’t import petrol everyday, but depend on timed contracts. Thus, it is impossible to change the price in short periods of time. The Government has created a Petrol Price Stabilisation Fund that has been very active.

To prevent the public from forming unreasonable expectations of the petrol business, I think the most important thing is to make the industry public. Also, there must be a commitment to petrol price stabilisation from the Government and the enterprises, since petrol prices cannot be adjusted everyday like other products.

VietNamNet/Viet Nam News

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