It is proposed that petroleum businesses can charge a maximum rate of 20%.

The Ministry of Industry and Trade believes that regulating gasoline prices is going through many steps, so it proposes that businesses calculate their own retail prices from the 7-day average world price announced by the State.

The above content is stated in the second draft of the new decree, replacing previous decrees on petroleum business. This draft was consulted by the Ministry of Industry and Trade from April 1, 5 days after the first draft.

According to current regulations, the State sets a base price as a basis for operating retail gasoline prices. This is the operating price on the basis of agreement between the Ministry of Industry and Trade and Finance, like a ceiling price for businesses to determine their own retail prices in the system. For example, in the operating period on March 28, the State announced that RON 95 -III was 24,816 VND per liter, so businesses could not sell higher than this level.

With the current operating mechanism, the Ministry of Industry and Trade believes that state management agencies and businesses have to take too many steps. Business traders do not proactively decide retail prices in the distribution system, but wait for the base price announced by the State management agency and then execute.

On the other hand, this base price is calculated based on factors formed in the past over a long period of time, such as business costs and weighted average import tax calculated on the previous quarter’s data to apply in the next quarter. This leads to prices that are not close to reality.

“The mechanism for managing gasoline prices is not currently guaranteed according to the market mechanism,” the Ministry of Industry and Trade commented in the draft report sent to the Government.

Therefore, in this draft, the Ministry still proposes that the State not regulate gasoline prices and that businesses can make their own decisions. Instead, the State announces the average world price and some fixed costs (foreign exchange rate, special consumption tax, VAT, import tax). However, the State’s world price announcement period will be 7 days, instead of 15 days as in the previous draft.

Based on this data, focal businesses will add business expenses and profit norms to calculate the maximum selling price. The retail price to consumers cannot be higher than this maximum level.

Gas station staff on Hai Ba Trung street refueling customers, April 2020. Image: Quynh Tran

With business costs and profit norms, the draft offers two options. Option 1, businesses are allowed to add 1,800-2,000 VND in costs and profit norms to the retail price. This cost is given by the Ministry of Industry and Trade based on the actual input costs, commissions, and discounts to the retail stage of the business. This is the same calculation being applied.

Plan 2, businesses will calculate a percentage, depending on fluctuations in world gasoline prices. Specifically, the maximum level can be 20% when the world price is 30 USD per barrel and 4% when the world price is 120 USD per barrel.

This agency believes that allowing key businesses to decide their own selling prices will create a competitive environment for gasoline prices, helping them to be autonomous when setting selling prices. This is also a reform that helps traders and regulators not have to periodically calculate and publish costs.

In case the ratio of business costs and profits of an enterprise increases, the Ministry of Industry and Trade and the Ministry of Finance report to the Prime Minister for consideration and adjustment in accordance with reality.

For areas far from ports and wholesale warehouses, if actual costs increase, wholesalers and distributors can add this amount to the maximum selling price. Enterprises must report to the Ministry of Industry and Trade and the increase must not exceed 2% of the selling price.

Related to Price Stabilization Fund, the Ministry of Industry and Trade added a number of regulations to protect the viewpoint of maintaining the fund. Accordingly, when world prices increase continuously for 15 days, this Ministry will send a document to the Ministry of Finance to summarize and report to the Prime Minister to decide on appropriation and expenditure according to the Price Law.

The new draft also maintains the viewpoint of continuing to allow focal points to rent warehouses, but requires periodic reports on warehouse use, and assigns the Departments of Industry and Trade to inspect and supervise.

The focal enterprise must ensure a total petroleum source of at least 100,000 m3, tons of petroleum per year. The total source of implementation is calculated from the amount of imported gasoline and oil purchased from domestic factories, without having to trade back and forth between focal points. At the same time, distributors are expected to only buy gasoline from wholesalers, not to trade with each other.

By Editor

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