October 22, 2019 10:36

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It is necessary to maintain the Petroleum Price Stabilization Fund

09:49 | 06/06/2019

VCN- In Vietnam’scurrent conditions, the petroleum price stabilization fund is still necessary to regulate domestic petroleum prices, contributing to macroeconomic stability, controlling inflation as well as protecting consumers’ interests. However, operating the Petroleum Price Stabilization Fund requires flexibility in accordance with practice.  

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The petrol price stabilization fund is a tool for the State to regulate domestic petrol and oil selling prices in order to harmonize the interests of consumers, enterprises and the State. Photo: Nguyen Thanh.

Effective economic measures

In a recent discussion at the National Assembly on socio-economic development, Deputy Prime Minister VuongDinh Hue elaborated on many issues related to curbing inflation this year, including mention of petroleum management.

The Deputy Prime Minister stated thatin 2019, the Steering Committee for Price Management based on five calculation scenarios have selected the operating scenario to control the Consumer Price Index (CPI) from 3.3-3.9% and continue to persevere this goal in the future. In order to achieve this goal, the Government is expected to implement a number of key solutions, including measures to actively monitor the market supply and demand developments and prices to developstabilization solutions, especially for some essential goods such as electricity and petrol prices.

"In the future, we will continue to adjust domestic petroleum prices in line with the movements of world oil prices and use price stabilization tools like the Petrol Stabilization Fund to ensure macroeconomic stability,"Deputy Prime Minister VuongDinh Hue said.

Previously, the most prominent point in recent times is the petition to abolish the petrol price stabilization fund sent by the Vietnam Petroleum Association (VINPA) to the Government. According to the document from theVINPA,the setting up of petroleum price stabilization fund at VND 300/liter according to the provisions of Decree 83/2014/ND-CP on petroleum business is causing consumers to suffer more than profits when considering quality, people are paying for the fund. The use of the petroleum price stabilization fund with bold administrative intervention should distort the price of the petroleum market.

In fact, Deputy Prime Minister VuongDinh Hue affirmed using the petrol price stabilization fund to ensure macroeconomic stability, the keeping or giving up of the price stabilization fund was mentioned many times by the leadership of Ministry of Industry and Trade. According to Deputy Minister of Industry and Trade Do Thang Hai,the petroleum market has not fully operated in accordance with the market nature and it is controlled by the State, so leaving the fund at the present time is not appropriate.

“The fund's principle is when the balance is closed; it is difficult to take it out when it is difficult. After ten years of operating gasoline prices, we see this as an effective economic measure. This is not an administrative intervention. In fact, personally, I do not want to have the Oil Stabilization Fund. However, at the present time, there is still a need for a fund, which needs a managerial role of the State,”stressed Deputy Minister Do Thang Hai.

Economist Ngo Tri Long provided additional comments. In the context, gasoline prices are being priced by the State, it is necessary to have the Price Stabilization Fund. State management of prices must have useful tools in hand – when world prices rise, the Fund will help to discharge stabilization of gasoline prices.

It needs to be flexible

Regarding petroleum management, in the report 229/BC-CP of the Government sent to the National Assembly on May 21, about the management of electricity and petrol prices, the Ministry of Industry and Trade inherited the Prime Minister's authorization on some related content. In which: "Petrol and oil in the list of conditional business lines, under the list of goods and services subject to price stabilization as stipulated in Law on Price No. 11/2012/QH13. In principle, the domestic petrol and oil selling price must be implemented according to the market mechanism with the State's regulation and management, the petrol price stabilization fund is a tool for the State to regulate petrol and oil selling prices in order to harmonize the interests of consumers, enterprises and the State, therefore, if the Fund to stabilize the price of petroleum is removed, the State will no longer have the tools to regulate domestic petroleum prices, contributing to economic stability, controlling inflation as well as protecting consumer interests."

In fact, it is easy to see, in the latest operating period of gasoline price on June 1, the Ministry of Industry and Trade and Finance also changed quite flexibly in setting up the price stabilization fund, the amount set for E5RON92 gasoline is 100 VND/liter; continue to maintain the level of setting up the price valorization fund for RON95 and other current oil products at300 VND/liter. According to the inter-ministry, in the last 15 days, due to the influence of political issues and trade tensions between major countries, the price of petroleum products in the world market has fluctuated. In order to contribute to stabilizing prices of consumer goods, controlling inflation, stabilizing the macro economy; based on the actual situation of the petrol price stabilization fund, the inter-ministry continues to spend the price stabilization fund on E5RON92 gas with a lower cost than the previous period can reduce E5RON92 price to the most reasonable level, while increasing the Petrol Stabilization Fund, and encouraging bio-petrol consumption.

In the operating petroleum business, Assoc. Pham The Anh (Hanoi National Economics University) expressed his view: "For petroleum business, to survive and promote the role of the petrol price stabilization fund,the market needs to be placed on top. Besides, the petrol price stabilization fund must be used flexibly and should not be used in a blameless manner."

To better implement the management and administration of petroleum business, report 229 / BC-CP stated: The Government has directed the Ministry of Finance to preside over and coordinate with the Ministry of Industry and Trade and related agencies to continue to monitor, research, evaluate and review amendments to tax regulations, study the regulation of environmental protection tax for bio-petrol E5 and E10, in accordance with the emission levels to the environment. The Ministry of Industry and Trade shall continue to review and study to reduce some investment and business conditions in the petroleum sector in order to create more conditions for businesses to participate in petroleum business activities to the next petroleum market, more competitive and better supply; coordinate with the Ministry of Finance and relevant agencies to continue studying and proposing amendments and supplements to Decree No. 83/2014/ND-CP to better improve the management and administration of the petroleum market.

By Hanh Nguyen/Bui Diep