Petrol prices in state of flux

More motorists can expect more misery at the petrol pumps

An official from the Ministry of Finance’s (MoF) Price Control Department said petrol retail prices could be raised soon.

“A price hike is necessary given the fact that petrol traders are bearing losses of more than VND2,000 per litre, the import tax rate already fell to zero per cent and the country’s Petroleum Price Stabilisation Fund has run  out of money. Moreover, world petrol prices have escalated,” he said.

The central bank has just devalued the dong by 9.3 per cent, bringing the USD-VND exchange rate’s mid point to VND20,683 per dollar.

The adjustment has put pressure on enterprises which have to borrow dollars from banks to pay for petroleum imports.

Dang Vinh Sang, general director of Saigon Petrol, told VIR that enterprises currently could not ask for Petroleum Price Stabilisation Fund help because it had been empty for a long time.

Sang said the State Bank’s exchange rate adjustment made petrol companies bear double loss. “With the new exchange rate, petrol importers will have to pay an additional  VND900 per litre. Besides, they often have to borrow instead of buying dollars from banks. So when the debt is due, they will have to buy dollars from banks with the higher prices of VND1,200-1,400 more for every dollar.”

Sang said until late January, Saigon Petrol had incurred a loss of up to VND50 billion ($2.4 million)

Vuong Thai Dung, deputy general director of the state-owned Petrolimex - which holds a nearly 70 per cent domestic petrol retail market, said the corporation owned up to hundreds of millions of dollars to foreign partners and local banks, and with the new exchange rate, the average loss per day was VND70 billion ($3.4 million).

“While the input cost increases, we cannot raise our selling prices which made us suffer big losses. Meanwhile, enterprises still have to meet profit targets and price stabilisation measures under government requests,” he said.

Dung said the local petrol price should be in line with the market mechanism under Decree 84/2009/ND-CP dated October 15, 2009 on oil and petrol trading. According to the decree, from late 2009, petroleum businesses were allowed to set their selling prices in line with the market mechanism.

However, in fact, from March 2010 local petroleum market has not operated in accordance with this decree. One of reasons is that the state still has to intervene in petroleum selling price adjustment which aims to stabilise the local market and curb inflation in 2010.

Dung also said petrol firms were under pressure to ensure supplies of petroleum for the domestic market with difficulties in buying US dollars and accessing dollar-denominated loans as the major cause.

“Banks have done their utmost in selling us the greenbacks under prime ministerial instructions. However, what they could give us is short of our expectations,” Dung lamented.

Each year, Petrolimex needs around $6 billion for importing petrol products, at an average of $500 million per month.

“Procuring sufficient greenbacks to pay back bank loans is another headache to petroleum firms currently.”