Brian Jeffrey
The planned decree would authorize major petroleum distributors to consider input indicators announced by MOIT and utilize a specified calculation method to establish their sales prices.
These major distributors and suppliers would be empowered to set retail petroleum prices (and wholesale prices for mazut) within their retail networks, aligning with their operational costs but capped below maximum petrol prices set for different periods.
Following a specified calculation, the maximum petroleum price would be the global petroleum price multiplied by the exchange rate, plus additional factors like import tariffs, luxury tax, environmental tax, VAT, business expenses, and targeted profit margins.
Nguyen Minh Duc of the Vietnam Chamber of Commerce and Industry (VCCI) mentioned that the change proposed does not differ significantly from the current system, where enterprises must adhere to state-defined formulas and input costs for price calculation.
If implemented, the ceiling prices under the new scheme will more closely reflect total petroleum distribution expenses, limiting enterprises to sell at or below these prices, hindering price competition.
Comparing with pricing schemes in other countries, under one model, the state dictates prices without room for maneuver by enterprises; in another, ceiling prices are set as the upper limit; and the third model has no state-defined prices for petroleum products.
According to Duc, consumers typically accept state-set ceiling prices without actively comparing alternatives, leading enterprises to adopt these set prices without undercutting competition.
He concluded that the proposed scheme resembles the long-standing ceiling price format currently in use.
Nguyen Tien Thoa, leader of the Vietnam Price Appraisal Association, expressed that despite the intent to shift from state-determined ceiling prices to enterprise-based pricing under the new scheme, state intervention will persist, impacting market dynamics and enterprise operations.
Thoa remarked that the new proposal seems regressive compared to current regulations, restricting enterprises from establishing selling prices until the state discloses price calculation factors.
Thus, enterprises would essentially sum up already predetermined costs to derive selling prices.
Commenting on allowing major distributors to set maximum selling prices, a businessman noted the control they would have over costs and retail profitability, potentially limiting consumer options in the market and complicating small enterprise supply chains.
Some suggest clearer regulations on profit margins relative to MOIT’s disclosed input costs would be beneficial.
Thoa emphasized the need for revamping the petroleum distribution scheme to empower enterprises to set prices, negotiate, and compete freely on pricing.
He stressed the importance of eliminating state-defined business costs for enterprises and allowing market-based price determination to ensure fair profits across the value chain.
