Government petrol price move may add more fuel to inflationary fire

Consumers are already taking a massive hit when they visit the petrol pumps

Decision No. 12 on petrol and kerosene prices was signed by Minister of Finance Vu Van Ninh, on February 25. The decision allows for the price of petrol to be decided by businesses, while diesel and kerosene prices would increase by VND3,700 ($2.3) to VND13,900 ($0.87) per litre.

Ninh said that the adjustments would ensure that petrol enterprises survive without relying on state subsidises after oil rose to over $100 per barrel. Immediately after the adjustment, the retail petrol price increased by VND1,500 ($0.09) to VND14,500 ($0.9) per litre at petrol stations nationwide.
The adjustments aim to rescue 14 existing petrol firms which are claiming accumulative losses due to rising oil prices and save the state over VND10,000 billion ($620 million) per annum.

However, experts said the economy would have to suffer rocketing prices of commodities, products and services which use petrol and kerosene as input materials. Tran Dinh Thien, economist and deputy head of the Vietnam Economic Institute, said that the petrol and kerosene price rise would hurt many businesses.
Do Quoc Binh, president of the Hanoi Taxi Association, said that transport companies were in shock following the sharp increases.

“Taxi charges and transport rates might increase by 10 per cent at least in the coming time,” he said. He estimated that the petrol price increase “has resulted in an average loss of VND600,000 ($37) per taxi per month.”

Like transportation, firms in several other sectors and industries such as electricity, cement, steel, coal, sugar processing have had signals to increase prices following the government’s adjustments.
Dinh Quang Tri, deputy general director of Electricity of Vietnam (EVN), said that EVN had asked the Ministry of Industry and Trade to increase the price of electricity as of July 1.

Ninh said that the petrol and kerosene price adjustment could make the consumer price index (CPI) increase by 0.6 per cent.