Gov't rapped for poor fuel price management

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The government's management of fuel pricing has been strongly criticized by experts after it allowed the latest hike in gasoline prices at a time when global prices have gone down.

They say that such moves not only undermine public confidence, but also hurt enterprises struggling with lower purchasing power and the economic slowdown.

On March 28, the government allowed fuel traders to raise retail prices of oil products.

Retail prices for 92-octane petrol, the most popular grade, rose 6.7 percent to VND24,550 (US$1.2) per liter, while diesel rose 1.7 percent to VND21,900 per liter. Kerosene was raised 2.2 percent to VND22,050 per liter and fuel oil jumped 4.4 percent to VND18,457 per liter.

Local businesses and experts said the hike was not reasonable as it was announced at a time prices in the world oil market were declining.

Bui Danh Lien, chairman of the Hanoi Transport Association, said price hikes are quite normal in a market economy, and consumers accept them in principle.

However, the price increase on March 28 was unexpected as world gasoline prices had gone down, he said. On March 28, the price for gasoline for delivery in April reduced 0.3 percent to $3.11 per gallon in New York.

The government responded to criticisms saying it had not increased prices earlier despite hikes in global prices because it was able to use the price stabilization fund.

The fund had run out, and it was necessary to increase prices now, it said, explaining that the despite the recent drop, global prices remained high and smuggling was rampant.

However, critics said the fund has not been supervised by any independent inspection agencies, giving rise to doubts in people's minds.

Lien said the rationale of preventing smuggling by increasing the prices cannot be accepted. The two ministries said the gap in prices between Vietnam and neighboring countries such as China, Cambodia and Laos has widened, spurring smuggling.

Lien said preventing smuggling is the responsibility of the market control agency, and other ways should be found to fight, like strengthening market controls.

"It is unfair to force local consumers to buy gasoline at high prices to prevent smuggling," he said.

Economist Le Dang Doanh said the use of price stablization fund should have been supervised by auditors and associations. The two ministries should also let people know how much of the fund they have spent.

Without any oversight, it could happen that in fact, petroleum firms may make use of the fund to earn profits, by taking much money from it to offset their small losses, he noted.

Not agreeing with the hike, economist Nguyen Minh Phong said the state agencies should review their gasoline price management.

"The government should have allowed firms to increase prices when the cost in the world market rises. If it had done so, people would have suspected nothing. However, it did not do this.

"It used the stabilization fund to keep prices unchanged when the world prices went up. After using up the fund, it is raising prices while the world cost downs. The price adjustment is unreasonable," Phong said.

The price hike will be a big blow to local firms, experts said. 

Lien said transport firms would be in a very tough situation. They now have to pay many kinds of fees, including road use fees and other transportation costs. A transport firm pays nearly VND10 million in fees a day, while receiving only a few orders.

"We would face losses if we do not raise transportation costs. And we will lose customers if we increase prices."

Echoing Lien, Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association, said the situation would be worse. The production for one ton of steel products needs 35kg of fuel oil, thus input costs would dramatically rise for steel firms. Many would have to scale back production, he said.

Vietnam's GDP expanded 4.89 percent in the first three months of the year from the same period a year earlier, compared to 5.44 percent in the last quarter of 2012, according to the General Statistics Office.

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