Not much different from current regulations

In the draft Decree amending the Decrees on petroleum trading, the Ministry of Industry and Trade proposes that petroleum traders base on the input parameters announced by the Ministry of Industry and Trade and the calculation formula prescribed in the Decree to self-calculate and announce the traders' petroleum selling prices.

Based on the actual situation at the enterprise, the main petroleum trader and the petroleum distributor decide the retail price of petroleum (except for fuel oil, which is the wholesale price) in their distribution system in accordance with the actual costs incurred at the enterprise and not higher than the maximum petroleum selling price as prescribed.

The maximum selling price of gasoline is implemented as follows: The maximum selling price of gasoline is equal to (=) {World gasoline price (x) foreign exchange rate} plus (+) import tax plus (+) special consumption tax plus (+) environmental protection tax plus (+) value added tax plus (+) business expenses and standard profit of the enterprise.

Legal expert Nguyen Minh Duc, Vietnam Federation of Commerce and Industry, said: Enterprises are allowed to decide on gasoline prices themselves, but based on the price calculation formula issued by the State, the input costs are also announced by the State, which is not much different from current regulations.

If this mechanism is implemented, the ceiling price will be very close to the total cost of supplying gasoline. Therefore, the majority of businesses will still have to sell at the ceiling price, and it will be difficult to sell at a lower price to compete with other businesses.

In fact, there have been studies in the world on 3 methods of managing gasoline prices. The first is that the State decides the price, businesses are not allowed to sell higher or lower. The second is the ceiling price, meaning businesses are not allowed to sell higher than the ceiling price. The third is that the State does not regulate the price.

“Of the three areas, the area where the State regulates the ceiling price has the highest gasoline price. The area where the State does not regulate the price has the lowest gasoline price,” Mr. Nguyen Minh Duc shared.

Explaining this conclusion, Mr. Duc shared: Because when setting a price ceiling, consumers always have the mentality of accepting that price, so businesses always sell at this price ceiling. They have no reason to sell at a lower price. In fact, the habit of consumers in comparing prices does not exist much, leading to consumers having no motivation to compare prices.

"Therefore, with the current plan as proposed by the Ministry of Industry and Trade, the State does not announce the ceiling price, but announces the components that form the price and the formula that creates the ceiling price, which is no different from the Ministry announcing the ceiling price as before," this expert assessed.

According to Mr. Nguyen Tien Thoa, Chairman of the Vietnam Valuation Association, even if the current management method is changed from the State announcing the base price as the basis for businesses to set prices, to the State not announcing prices but announcing costs for businesses to set prices, it will not change the nature of the State directly intervening in the market with ceiling prices, including market costs.

According to Mr. Thoa, the new proposal is even more "backward" than the current regulations in that the Ministry of Industry and Trade has not yet announced the price formation factors, so businesses cannot decide to announce prices. Businesses only have the task of calculating the total cost of price formation that has been prescribed by the competent authority to form their own price.

Avoid causing difficulties for the petroleum supply chain

A petroleum enterprise said: The maximum selling price decided by the wholesaler means that it also determines the costs and profits of the retail enterprise. The regulations in the Draft Decree on Petroleum Business continue to create advantages for large wholesale enterprises when they hold the dominant market share. Thus, it is very difficult for consumers to have many prices on the market to choose from, and it even causes difficulties for the supply chain of small enterprises such as distributors and retailers.

Some traders said that there should be specific regulations on profit margins compared to input costs as prescribed by the Ministry of Industry and Trade.

To overcome the shortcomings in the petroleum business, Mr. Nguyen Tien Thoa suggested that it is time to fundamentally and truly innovate the right to self-determine prices, negotiate prices and compete on prices for petroleum businesses, ensuring compliance with the principles of correct calculation, reasonable and valid costs and profits according to objective market signals. Abolish all State mechanisms for announcing source creation costs, standard business costs, etc.

Appraising the draft Decree, the Ministry of Justice also stated that: The draft Decree regulating the maximum price in the petroleum business is essentially no different from current regulations, and is not consistent with the statement "minimizing the intervention of state agencies in deciding on the selling price of enterprises, creating a competitive environment for petroleum prices according to the market mechanism, helping enterprises to be flexible and autonomous in deciding the selling price of petroleum on the market...".

Therefore, the Ministry of Justice requests that the drafting agency coordinate with the Ministry of Finance to review and consider revising the above provisions in the draft Decree, clearly explain in the Government Submission, ensure compliance with the law on prices and seek the Government's opinion on this issue.

The Ministry of Industry and Trade established an inspection team, 3 "big guys" in the petroleum business were handled . After inspecting a series of "big guys" and petroleum distributors, the Ministry of Industry and Trade has handled 247 violations in the business of this essential commodity in the past 7 months.