Petrol price pain

Every last drop: rising fuel costs are hitting both businesses and consumers hard

In a decision signed by Minister of Trade, Truong Dinh Tuyen, the new price of A92 gasoline was set at VND11,000 ($0.70) per litre, an increase of 17 per cent.
Meanwhile other types of gasoline such as A90, A83, diesel and kerosene experienced price hikes of between 6 and 15 per cent.
Officials from the Ministries of Finance and Trade explained that increasing international oil and gas prices had forced the Vietnamese Government to drop its fuel subsidy policies.
It is estimated that since the beginning of the year the government has paid out hundreds of billions of dong in financial subsidies to petrol importers nationwide to help them settle increasing losses brought about by price hikes on the international market.
Petrol importers said that despite state subsidies, they remain bogged down by increasing daily losses. Petrolimex, the flag carrier in the petrol business, which accounts for 60 per cent of national market share, said it was losing around VND35 billion ($2.2 million) per day as a result of the gap between imports and domestic prices.
Petrolimex deputy general director Bui Ngoc Bao said that the company had suffered cumulative losses of VND300bn ($19m) so far this year.
He calculated that despite the government decision to increase the price of oil and gas, Petrolimex will still suffer losses of VND27bn ($1.7m) per day as there remains a gap between the imported price of fuel and the price set on the domestic market.
Even though the decision has brought some financial relief to petrol importers, transport service enterprises are claiming that the increasing price of oil and gas will force them into further financial difficulties.
An official from the Vietnam Motorbike and Automobile Association, who declined to be identified, predicted that increasing fuel prices would force some transport enterprises into bankruptcy.
The official predicted that a number of transport service enterprises would move to other business sectors, whilst the remainder would lower service quality or face unhealthy competition,
resulting in confusion in transport services.
Nguyen Anh Dung, deputy general director of the Transport Service Corporation (Transerco) said the ratio of fuel expenses accounted for between 38 and 45 per cent of the total expenses of businesses in the passenger transport market.
He said that the hike in oil and gas prices - the main input material for the transport sector - would effect the efficiency and profitability of transport enterprises.
Dung said that oil and gas price increases had negatively affected Transerco’s business in the past .
“It becomes worse and worse as most input material expenses have increased but transport charges haven’t increased, bogging down businesses in this sector with further difficulties,” he said.
Vo Ba, deputy general director of the Mai Linh joint-stock company, which controls the network of Mai Linh taxis in Hanoi and Ho Chi Minh City, said “we are falling into a [situation] of spiraling difficulties as a result of increasing prices of oil and gas that will push us into predicted losses".
Experts said that apart from the losses suffered by private companies, ordinary people would also be hit by the Government’s decision, as the population relies on petrol to fuel the 17 million motorbikes that transport the majority of people around the country.




No. 759/May 1-7, 2006