Proposal for Companies to Determine Petroleum Prices Themselves by MOIT

The Ministry of Industry and Trade (MOIT) has submitted a revised draft decree on petroleum trade to the Ministry of Justice (MOJ), suggesting that petroleum distributors have the authority to set prices independently.

The new approach involves disclosing factors influencing petroleum prices, such as global price averages (updated every 7 days) and fixed expenses (exchange rates, taxes, and tariffs).

Distributors will utilize this information to calculate their highest selling prices by adding operational costs and standard profits. Retail prices must not exceed these maximum prices, with a slight variance allowed in remote areas.

While companies have pricing autonomy, they are required to report their prices to the MOIT for monitoring.

MOIT asserts the need for this change due to current regulations not adequately ensuring market fairness and a cumbersome pricing procedure.

Under the existing system, the Ministry of Finance instructs how to establish base prices and adjust expenses and profits based on distributor reports and import tariffs, with MOIT then determining retail prices accordingly.

Retail prices are reviewed weekly and act as the price cap for businesses. Retail prices should never surpass these caps.

The latest draft omits specifics on operational expenses and profit margins that companies can include in retail prices but stipulates the initial costing norm (subject to triennial reviews). Distributors will annually adjust expenses based on inflation and set profit margins.

Incidental costs like losses in transit, loading, transport, and insurance will be determined quarterly by the MOIT, requiring businesses to submit audited expenditure reports every three months.

MOIT outlines various types of distributors in the petroleum supply chain, offering two options for petroleum distributors in the recent draft.

Option 1 limits enterprises to purchasing from wholesalers and manufacturers without inter-trading. Option 2 allows trading between distributors.

MOIT supports Option 1, citing concerns of additional costs and supply control challenges with inter-trading.

Anticipating a rise in self-service fuel stations in the future, MOIT has proposed eliminating training requirements for station staff on fire safety and environmental conservation.

Furthermore, the draft streamlines administrative procedures related to petroleum retailing while retaining mechanisms like the petroleum price stabilization fund.

In case of abnormal market fluctuations or emergencies, MOIT will collaborate with relevant authorities to report to the government for appropriate action as per the 2023 Price Law.