The Finance Ministry will soon step up inspections to prevent fuel traders from further misusing the price stabilization fund, Nguyen Tien Thoa, head of the Department of Price Management under the ministry, tells Thanh Nien Weekly.
Thanh Nien Weekly: There is talk that the Vietnam National Petroleum Corporation (Petrolimex) has misused trillions of dong from the price stabilization fund. Can you comment on this?
Nguyen Tien Thoa: In the middle of last December, the Ministry of Finance inspected all gasoline traders on their use of the price stabilization fund. The inspection showed that most firms have strictly obeyed the Ministry of Finance's regulations on building and using the fund. As for Petrolimex, money for the fund is in the firm's account. However, Petrolimex's spending at VND1.242 trillion (US$59.14 million) exceeds the amount they are allowed to take from the fund to cover business losses. The Finance Ministry has sent an official document asking Petrolimex to return the money, and the firm is planning to do it.
What are the impacts of this misuse?
In fact, it has not caused any losses, because the money is in Petrolimex's account. In the context of business difficulties, in terms of capital mobilization and purchasing foreign currency, the firm could temporarily use the fund to offset its capital shortfall. In terms of consequences, it does not cause any waste or loss, and it could actually help stabilize prices.
The money to set up the fund is contributed by consumers through their fuel purchase, but the money is held by firms. Is this fair?
There have been many opinions expressed that this is unreasonable, that the fund should be sent to the national treasury to facilitate the management and usage of funds when prices need to be stabilized. There are certainly some advantages when the money is sent to the treasury, like we don't have to frequently monitor usage of the fund by firms.
However, if the money is to be deposited in the State Treasury, enterprises will have to accumulate enough money before making a deposit. They will have to submit proposals that need approval from the fund's management board before getting their hands on the money. The State Treasury will then need time to consider the proposals before giving out the money. All this is very time consuming, making it next to impossible to achieve the target of stabilizing prices. If the money is deposited with the enterprises, the situation is reversed.
To manage the fund, management agencies should strengthen checks and inspections to detect shortcomings. Through recent inspections, we've realized that it is necessary to discuss with enterprises amendments relating to using and managing the price stabilization fund.
The Ministry of Finance has detected shortcomings in the formation and use of the fund. How can we deal with them?
As the People's Aspiration Committee of the National Assembly points out, while there is no law regulating the formation of this fund, it is stipulated in the Pricing Ordinance and the government's decree on price stabilization. Financial measures include the formation of price stabilization funds to stabilize the market when sudden changes take place.
We are compiling a law on pricing to replace the Pricing Ordinance. Many localities have said that it is necessary to have funds to stabilize prices, not only for oil and petroleum, but also other key products. Without the petroleum price stabilization fund, we would not have been able to stabilize prices as we have now. And without accompanying taxation measures, the current prices would have been at a different level.
In 2010, we mobilized VND4.4 trillion for the fund, and used VND3.5 trillion. But, we lost VND7 trillion in tax reductions. Therefore, in 2010, we used more than VND10 trillion to keep prices at the current level. In our opinion, basically, enterprises have implemented the price stabilization program correctly, and there have been no problems with our management.
But it is Petrolimex itself that has said we seem to use the price stabilization fund irrationally. What do you think?
Petrolimex had joined us in drafting Decree 84 which contains articles about the fuel price stabilization fund. Petrolimex has made great contributions to the decree. I don't know why it said that the fund is namesake.
The company has used VND1.2 trillion in the fund to compensate for its business losses. It has entered the accounts incorrectly. It has misused the fund. Now, it has to repay the money to the fund, so the fund is real. People contribute VND300 per liter of gasoline sold to the fund. So, the fund is real, not virtual.
Regarding Petrolimex's proposal to take money from enterprises' revenues to contribute to the fund, many firms have said it would be difficult to manage such contributions, because different enterprises have different revenues. Besides, enterprises make profits at one time, but incur losses at other times. For this reason, we must know when enterprises are making profits and wait till the end of fiscal year to calculate the contribution. If there is a need, early in the year, to stabilize prices quickly when the market fluctuates, we will have no money. So this proposal is not very rational.
People want their money to be monitored and managed well. How can this be done?
Intensified inspections should be carried out frequently. Besides, we will have to change the way enterprises make and submit reports on the formation of price stabilization funds. It is necessary to have regulations requiring regular reports and monitoring mechanisms to ensure that the fund's use is always under control, and that we can detect shortcomings in time to deal with them.