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Vacuum of management
Son Nguyen
Friday,  Jan 12, 2018,21:22 (GMT+7)

Vacuum of management

Son Nguyen

From a certain perspective, it can be said the Ministry of Industry and Trade has scored success when seeking to popularize the biofuel E5, as consumption of this fuel has doubled or even tripled in the first few days since the prices of fuels were adjusted last week. The results – which can be likened to killing two birds with a stone – are encouraging as the biofuel has been widely accepted on the one hand, and several loss-making ethanol plants have now seen light at the end of the tunnel and revived production on the other. Fuel traders are happy as well, so to say.

Overall, however, it can hardly be said the ministry’s move creates a win-win scenario. While energy enterprises may find the new policy agreeable, consumers see curbs, let alone their benefits being hampered.

In its latest announcement on the base prices of fuels on January 4, the Ministry of Industry and Trade in coordination with the Ministry of Finance decided to keep the biofuel E5 price unchanged, but did not regulate the price of the higher-standard fossil gasoline RON95. Such an intentional move, as seen in local media, has immediately fueled a heated controversy.

Right after the fuel price announcement, fuel traders have hiked the RON95 price to some VND20,200 a liter, creating a wide gap of nearly VND2,000 over the biofuel E5 price. Any price-conscious consumer will normally opt for E5, given the price difference of nearly 10%, and understandably, the biofuel consumption has skyrocketed.

A question surfaces over the wide margin, as E5 used to be only some VND1,000 lower than RON95. In explanations, the Ministry of Industry and Trade says as E5is encouraged in line with the Government’s instructions, the ministry allows fuel traders to tap VND857 from the fuel price stabilization fund for each liter sold to compensate the global price increase, while RON95 is not entitled to this fund this time. Fuel traders have therefore raised the RON95 price at their own discretion, without the State intervention, which is also seen a vacuum of management.

To further quell consumer concerns, the ministry says only those fuels popular on the market will have their base prices determined and announced by State agencies. Earlier, RON92 was more popular than RON95, so State agencies announced its base price periodically, but not the higher standard fuel price, the ministry explains.

Local media doubts the explanations.

Under Decree 83 and other guidelines, says VTV.vn, it is imperative to announce the base prices of fuels, be it RON95, RON92 or other oil products. The news site of the Vietnam Television asserts the prices of fuels must be made transparent under prevailing regulations, whether a certain type of fuel is popular or not as deemed by the ministry.

Even the ministry’s definition of the fuel popularity is questionable. A ministry official says popularity means the product is suitable to the majority of consumers, according to Tuoi Tre. Citing initial data from fuel traders, the newspaperput RON95 consumption at around 40% of the total, meaning tens of millions of consumers.

Another abnormity in the ministry’s latest move is that only traders of E5 can tap the fuel price stabilization fund, while RON95 is not subject to that incentive. In the past, traders of both RON95 and RON92 could extract the same amount from the fund for every liter sold. Therefore, the discrimination between the two types of petrol is undeniable. It should be noted that this fund is created by imposing a surcharge of VND300 on every liter of petrol sold, so consumers feel they are not treated fairly in this circumstance.

Dan Trijoins the chorus, questioning the foundation for the ministry to determine the popularity of a certain fuel when there are only two types of petrol for consumers. “Does the ministry mean to ‘float’ the RON95 price to force consumers into buying E5?” ponders the news site.

Similarly, Nguoi Lao Dong says the ministry’s decision to consider E5 as a popular product while ignoring RON95 prompts consumers to think that they are forced to buy the biofuel. The same question is raised by numerous other media outlets, including LaoDong, Vietnamnet, VnexpressandTien Phong.

Dang Dinh Dao, an economic expert, is quoted as saying in Nguoi Lao Dongthat “consumer frustration over the steep hike of the RON95 price is logical due to the lack of transparency in the fuel sector.” He furthers: “In my opinion, prices of fuels must be announced to safeguard the interests of consumers.”

Dien Dan Doanh Nghiep agrees that in the past the ministries of industry-trade and finance did not dictate the RON95 price but they were still able to control its price by using the RON92 price as reference. As RON92 is now totally replaced by E5, the ministries should have measures to control the RON95 price, in accordance with prevailing regulations.

With the ignorance now, the two ministries have acted against regulations issued by themselves, says the news site. “Specifically, Decree 83/CP on petroleum trading and inter-ministerial circulars issued by the Ministry of Industry and Trade and the Ministry of Finance, such as Circulars 39 and 90, all state that petroleum prices are market driven with State management… (and that) the Ministry of Industry and Trade must give the base prices for all petroleum products available on the market under the regulated calculation format,” says Dien Dan Doanh Nghiep.

In a defiant note, the Ministry of Industry and Trade still defends its stance, saying “it is not that the State management agency ignores or fails to oversee the RON95 price. In the short term, the State management agency will follow changes on the market so as to have a suitable management measure,” Tuoi Tre quotes a ministry representative as saying.

While it is impossible to judge the motives behind the ministry’s move to keep the E5 price and give fuel traders the right to determine the RON95 price, benefits for fuel traders as well as for owners of ethanol projects – and to some extent for the economy as well – have been ensured. However, the vacuum of management has been created, which puts consumer rights and interests under tenterhooks.

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