Not significantly different from current regulations.

In the draft Decree amending the Decrees on petroleum business, the Ministry of Industry and Trade proposes that petroleum wholesalers base their calculations and announcements of petroleum selling prices on the input parameters published by the Ministry of Industry and Trade and the calculation formulas stipulated in the Decree.

Based on the actual situation at the enterprise, petroleum wholesalers and petroleum distributors decide on the retail price of petroleum products (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 exceeding the maximum petroleum selling price as stipulated.

The maximum selling price of petroleum products is determined as follows: The maximum selling price of petroleum products equals (=) { World petroleum price (x) foreign exchange rate} plus (+) import tax plus (+) special consumption tax plus (+) environmental protection tax plus (+) value-added tax plus (+) business costs, standard profit margin of the enterprise.

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Fuel distributors are authorized to announce fuel prices. Photo: Nguyen Hue

According to legal expert Nguyen Minh Duc from the Vietnam Federation of Trade and Industry: While businesses are allowed to determine gasoline and diesel prices themselves, basing them on a formula issued by the state, with input costs also announced by the state, is not much different from the current regulations.

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

In fact, there have been studies worldwide on three methods of managing gasoline prices. Firstly, the State sets the price, and businesses are not allowed to sell higher or lower. Secondly, there is a price ceiling, meaning businesses are not allowed to sell above the ceiling price. Thirdly, the State does not set the price.

"Among those three categories, the one where the State sets a price ceiling has the highest gasoline and diesel prices. Conversely, the category where the State does not set prices has lower gasoline and diesel prices," Mr. Nguyen Minh Duc shared.

Explaining this conclusion, Mr. Duc shared: "Because when a price ceiling is set, consumers always have the mentality of accepting that price, so businesses always sell at this ceiling price. They have no reason to sell at a lower price. In reality, the habit of consumers comparing prices is not widespread, leading to consumers having no incentive to compare prices."

"Therefore, with the current plan as presented by the Ministry of Industry and Trade, the State does not announce a price ceiling, but announces the components that make up the price and the formula for creating the price ceiling, which is no different from the Ministry announcing a price ceiling 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 a basis for businesses to determine prices to the State not announcing prices but announcing costs for businesses to determine prices, the fundamental nature of the State's direct intervention in the market through price ceilings, including certain market-related costs, remains unchanged.

Furthermore, according to Mr. Thoa, the new proposal is even "a step backward" compared to the current regulations because businesses are not allowed to announce prices until the Ministry of Industry and Trade announces the factors that determine the price. Businesses are only tasked with adding up all the costs that determine the price, as stipulated by the authorities, to arrive at their own price.

Avoid disrupting the petroleum supply chain.

One petroleum business argues that the maximum selling price determined by the main distributors also dictates the costs and profits of retail businesses. The regulations in the draft decree on petroleum business continue to favor large distributors who hold a dominant market share. This makes it difficult for consumers to choose from a wider range of prices, and even creates difficulties for smaller businesses such as distributors and retailers in their supply chains.

Some traders argue that there should be specific regulations on profit margins relative to input costs, as stipulated by the Ministry of Industry and Trade.

To address the shortcomings in the petroleum business, Mr. Nguyen Tien Thoa suggested that it is time for a fundamental and genuine reform of the system, granting petroleum businesses the right to set their own prices, negotiate prices, and compete on price, ensuring compliance with the principles of accurate and complete cost calculation, reasonable and legitimate costs, and profitability based on objective market signals. He also proposed abolishing the entire mechanism of the State publishing the cost of source creation and the standard business costs.

In its assessment of the draft Decree, the Ministry of Justice also stated that: The draft Decree's provision on maximum prices in the petroleum business is essentially no different from current regulations and is inconsistent with the assertion that it "minimizes the intervention of state agencies in the pricing decisions of businesses, creates a competitive environment for petroleum prices according to market mechanisms, and helps businesses be flexible and autonomous in deciding petroleum prices in the market...".

Therefore, the Ministry of Justice proposes that the drafting agency coordinate with the Ministry of Finance to review and consider revising the above regulation in the draft Decree, provide a clear explanation in the submission to the Government, ensure compliance with the law on pricing, and seek the Government's opinion on this matter.

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