Petrol firms suggest increasing E5-RON 95 price difference

Petrolimex holds the largest petrol market share. Photo: Thanh Nien

Significant rise in E5 sales

According to statistics of petrol companies, after over four months of deployment, E5 petrol consumption is showing positive signs and has increased significantly against late 2017 and early 2018.

Specifically, Petrolimex remains the company holding the largest market share with total sales in the first quarter exceeding one million cubic metres, equaling an average consumption of 360,000cu.m per month, including 170,000cu.m of E5 and 190,000cu.m of RON95. In April’s first 15 days alone, Petrolimex’s total petrol sales hit 1.25 million cu.m, including 660,000cu.m of RON 95 and 592,000cu.m of E5.

E5 petrol made up 50 per cent of its petroleum pumps over the country.

The group also cited differences in petrol consumption among the country's regions. In the first quarter, E5 petrol sales made up 60 per cent of total regional sales in northern Vietnam, 30 per cent in the south, and 43 per cent in Central Vietnam.

Similar consumption patterns were reported by PetroVietnam Oil Corporation (PVOIL). With an average E5 petrol consumption of 50,000cu.m per month, the northern and the central parts accounted for 60-63 per cent of total sales, while the south only made up 36 per cent.

Petrol distributors propose wider gap

Most gasoline companies agreed that the little price difference between E5 and RON 95 (about VND857 per litre) leave consumers uninterested in switching. In addition, container fees and transportation for E5 petrol are higher than RON 95, making it business more difficult for petrol dealers.

Therefore, gasoline companies proposed the Ministry of Finance (MoF) and the Ministry of Industry and Trade (MoIT) to set a reasonable, VND2,500 per litre price difference between E5 and RON 95 via the Environmental Protection Tax. They also proposed MoF to take measures to adjust the input and output special consumption taxes of E5 petrol to help increase sales.

In March, the Vietnam Petroleum Association submitted a document to MoF requesting guidance on non-deductible excise tax on petroleum products used for the production of bio-fuel.

Specifically, before 2016, the Law on Special Consumption Tax stipulated a 10 per cent tax rate for A92 petroleum processing. E5 and E10 gasoline were mixed with the corresponding rates, including A92 gasoline’s 95 per cent and 90 per cent, and bio-ethanol’s 5 per cent and 10 per cent, respectively. Therefore, the rate of special consumption tax on E5 and E10 gasoline was 9.5 and 9 per cent per litre, respectively.

Since 2016, aiming to encourage bio fuel usage, MoF reduced special consumption tax on E5 and E10 gasoline to 8 and 7 per cent, respectively.

However, during implementation, many enterprises have realised that value added taxes shouldered by petrol businesses are too large. Some businesses even withheld up to dozens of billions of VND per month in value added taxes. This issue is predicted to exacerbate in 2018 over rising E5 sales. Currently, MoF is working on a solution to this issue.