Be careful when changing fuel pricing formula

	SBV asks commercial banks to support fuel traders
	Vietnamese enterprises change to catch the production shift
	Officially reducing import duty of petroleum products to 10%

Petroleum is an important and essential commodity for the economy, society, and people's lives. Photo: TD

Need a specific plan

The Ministry of Industry and Trade stated in a report to the government regarding the details of the fuel pricing formula that the petroleum market had experienced numerous fluctuations and some instability in the supply. One of the causes is that the basic price structure of petroleum does not accurately and sufficiently account for the costs of the oil and gasoline business, which results in losses for petroleum traders and leaves them with no choice but to cease operations.

The Ministry of Finance disagreed with this viewpoint and requested that the Ministry of Industry and Trade retract its arbitrary and incorrect evaluation of this content. According to the Ministry of Finance, domestic gasoline prices are influenced by global gasoline prices, thus sudden changes in global fuel prices will have an impact on production and business activities of traders, particularly during the operating period when prices were lower than the purchasing price. Likewise, the traders are also significantly impacted by changes in supply and demand, market competition, and business strategy.

The Ministry of Finance said that the adjustment of the standard costs in the base price has been made in accordance with the provisions of Decree No. 95/2021/ND-CP dated November 1, 2021 and Circular No. 104/ 2021/TT-BTC on November 18, 2021. The Ministry of Finance cites: the shipping cost of petroleum from abroad to Vietnam has been reviewed and adjusted three times according to the review of actual costs incurred at the leading petrol and oil trader.

According to the Ministry of Finance, the adjustment of the standard costs in the base price was made in compliance with the terms of Decree No. 95/2021/ND-CP dated November 1, 2021 and Circular No. 104/ 2021/TT-BTC on November 18, 2021. The Ministry of Finance said the shipping cost of petroleum from abroad to Vietnam has been reviewed and adjusted three times based on an analysis of actual costs paid by key oil and gasoline traders.

As for the options developed by the Ministry of Industry and Trade in the draft Decree amending and supplementing a number of articles of Decree No. 95/2021/ND-CP and Decree No. 83/2014/ND-CP on amending and supplementing several regulations on fuel trading, the Ministry of Finance proposes to the Ministry of Industry and Trade as follows: for option 1 in the draft (continue to control petrol and oil prices according to current regulations of reviewing and adding a number of actual costs incurred at the traders excluded in the current base price), it is necessary to review and evaluate to clearly identify additional costs in the base price and gather opinions to report to the Government for consideration and approval.

As for option 2, the draft stipulates: amending the pricing formula and method of announcing the base price of petroleum products in the direction that the State only publishes the price constituent elements including Platts price, taxes, and deductions, the amount of funding for the Price Stabilization Fund (BOG), standard profit; and other costs determined by the enterprises. With this option, the Ministry of Finance said, petroleum is an important and essential commodity for the economy, society and people's lives, so it is necessary to conduct a detailed assessment to determine the best timing and roadmap for changing the pricing formula.

It is necessary to clearly analyze the market

According to the Ministry of Finance, it is necessary to make a detailed assessment to identify the appropriate time and roadmap for changing the mechanism of the fuel pricing formula.

Accordingly, it is necessary to clearly analyze the market and the impacts from the change on petroleum manufacturing, trading, and domestic supply to ensure inflation control and macroeconomic management targets. Meanwhile, there are no policies to support vulnerable people such as poor people and people in remote areas with few petroleum stations, low competitiveness, and high business costs.

The Ministry of Finance suggested that the Ministry of Industry and Trade consider the actual situation and have a specific plan to control and decide the retail price and give sanctions to prevent unreasonable price increases.

Further, when changing from the base price into the announcement of four factors including standard costs, taxes, funds and standard profit, the Ministry of Industry and Trade should review carefully to calculate the deductions and use of the BOG; and review the mechanism of costs of enterprises to ensure the transparency and avoid the abuse to increase price unreasonably.

Tax sector strengthens measures to fight loss of tax revenue

According to the plan developed by the Ministry of Industry and Trade, the State authorities allow enterprises to self-determine costs in the selling price but control standard profit; and taxes. Therefore, the Ministry of Finance requested the Ministry of Industry and Trade to have an appropriate plan.