Vietnam gov't again says no to fuel price hike

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The government announced February 26 that it would not, for now, allow retail fuel prices to increase as part of an effort to control inflation.

Local fuel traders have been complaining that high global prices are causing them big losses.

Fuel traders in Vietnam, which imports most of its oil products, have to seek permission from the government before increasing prices. The authorities in the finance and trade ministries have rejected proposals to do so three times since mid-January. They have instead asked fuel businesses to offset part of their losses by using the price stabilization fund a rainy day fund that is raised when businesses make profits.

According to the finance ministry, local fuel prices are lower than those of neighboring countries. A liter of the popular petrol Ron-92, which costs VND23,150 at local pumps, is 9 percent cheaper than in China, 16 percent in Laos, and 23 percent in Cambodia, the ministry said Feb 27.

On the same day, the ministry doubled the fund's return money to gasoline traders to VND2,000 per liter. Prior to this increase, traders had incurred a loss of VND800 on every liter of gasoline retailed, according to Nguyen Anh Tuan, deputy director of the Price Management Department at the Finance Ministry.

Besides the fund, the government said it could use "other financial measures" to stabilize fuel prices, without elaborating.

The finance and trade ministries earlier this week said they were working on four options as solutions to support fuel traders.

The ministries have yet to disclose more information about the options because, according to Tuan, the situation is "complicated" and they want to avoid speculation on gasoline.

Economist Le Dang Doanh said whatever solution fuel regulators will approve, they should announce it soon to stabilize the market.

An investigation conducted by Thanh Nien found that many gas stations, which were banking on a price hike, have stopped selling gasoline. On February 24, a gas station owned by fuel trader Hausinco in Hanoi's Cau Giay District closed temporarily, claiming it ran out of gasoline.

Economist Ngo Tri Long said the country would risk high inflation if fuel prices increase.

Consumer prices mounted 2.59 percent in the first two months alone while the government set the target of keeping inflation below 6.8 percent this year, he said.

A surge in fuel prices will push output costs up, burdening local firms further amid the economic downturn, Long said.

However, Cao Si Kiem, former governor of the State Bank of Vietnam, said an increase might be inevitable if the upward trend of global fuel prices continues. In that case, the government would have to strive to keep prices at the lowest possible rate.

He suggested that the government cut import tariffs so that it would not have to raise fuel prices substantially.

The government has set the tax rate of 12 percent on gasoline, unchanged for nearly a year.

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