Gasoline price reduction - reducing cost burden

People expect that the commodities can be reduced following the price of petrol. Photo: Nguyễn Thanh

Still delay in the sale of goods

Immediately after the National Assembly Standing Committee agreed to reduce an additional VND1,000 VND/liter of environmental protection tax for gasoline, VND500-700/liter for oil, the price of petrol dropped sharply by about VND3,000/liter from 00:00 on July 11. In the gasoline price management period on the afternoon of July 21, the prices of petroleum products continued to decrease. Specifically, the price of E5RON92 gasoline was not higher than VND 25,073/liter (decreased by VND 2,715/liter compared to the current retail price). The price of RON95-III gasoline was not higher than VND26,070/liter (decreased by VND 3,605/liter compared to the current retail price). This contributed to reducing pressure on businesses and people, especially industries that have been strongly affected by gasoline prices in recent years.

Speaking with a reporter of Customs News, Mr. Ha Manh Hung (a technology car driver in Hanoi) said that he had only "opened the app" to run the car again in the past one week when the price of gasoline had dropped. According to Hung, at the time when the price of gasoline reached over VND 30,000/liter, many drivers of technology cars as well as traditional taxis had to accept to stop driving because the amount of money collected was not enough to offset fuel and depreciation.

“The price of gasoline was constantly rising while there was a hot weather, so they had to open air conditioner continuously as well as the traffic jam, causing fuel consumption quickly, the deduction rate of car companies is not small, resulting in earning not enough revenue to compensate for the expenses that make it difficult to save money. We had to stop driving for a while. When the gas price dropped, I dared to drive again, to earn more income for my family, even though the money I earned was not great," Hung shared.

Unlike the transportation sector, which is directly affected by the increase and decrease in gasoline prices, food prices have so far not shown any signs of lowering. As recorded in Hanoi, food prices remained the same compared to before the sharp drop in gasoline prices on July 11, making the business situation of many small businesses more difficult due to lower consumption.

Explaining about the above situation, economic expert, Assoc. Prof.Dr. Dinh Trong Thinh said that the reduction of gasoline prices would reduce the burden of spending costs for people and businesses. However, it is unlikely that commodity prices would fall immediately after adjusting gasoline prices, because there was often a delay.

“I think the recent decline is quite deep, however, it is only a correction within 10 days. The next 10 days are still unknown, especially in the context that the world situation is still volatile. Therefore, enterprises and business households cannot adjust each day following the increase and decrease of gasoline, but it would have to adjust monthly. The decline in the price of goods would have to be gradual, giving time to come to life,” Assoc. Prof. Dr. Dinh Trong Thinh said.

Currently, people are expected that the items could be reduced following the price of gasoline in order to be appropriate with the average income of workers.

Study on gasoline tax reduction

It can be seen that, at present, the Ministry of Finance is still trying to propose solutions to stabilize domestic gasoline prices, supporting production and consumption. Along with the reduction of environmental protection tax to the floor level, the Ministry of Finance continues to propose the Government to reduce from 20% to 10% the preferential import tax for petroleum products (instead of 12% as suggested earlier).

The Ministry of Finance said that, in the face of the rising price of petroleum in the world, while domestic supply has technical problems the Ministry of Finance has drafted a decree on the Schedules of Export Tariff and the Preferential Import Tariff, List of commodities and their flat tax, compound tariff and out of quota import tariff.

The Ministry of Finance has received 63 documents on consultation from relevant agencies, including 16 ministries and ministerial-level agencies; 39 People's Committees of provinces and cities; VCCI; and the Petroleum Association. The Ministry of Finance is synthesizing the opinions to submit to the Government for consideration and promulgation.

According to the Ministry of Finance, petroleum is both a strategic, important and essential commodity that has a strong impact on production and business activities and people's social life, as well as macroeconomic stability. High gasoline prices and shortage of gasoline supply will put great pressure on production and business costs of businesses as well as people's spending.

The disruption of petroleum supply can also delay production and business activities of enterprises, potentially causing social instability. The reduction of the preferential import tax rate for gasoline to 10%, although can contribute to the reduction of domestic gasoline prices, is still only at a low level. However, the adjustment and reduction of import tax will have a great impact on production, business and consumption of the people; facilitate businesses to import gasoline from many other countries, thereby promoting competitiveness to reduce the price of this item.

Following the direction of the Government as well as the National Assembly, the Ministry of Finance continues to monitor and is planning to have a plan to reduce excise tax as well as VAT if oil prices remain high.