Gas prices in Vietnam have risen for six times since December 2011, with traders claiming that the increases are necessary.
Domestic gas prices dependent on those of imports
After gas prices were raised twice in December 2011 consumers were shocked as they watched the increases continue into the first two months of the year, adding a total of VND70,000 per 12-kilo canister.
Despite having officially-registered selling prices, many retailers have been applying real prices of between VND10,000 and VND20,000 (USD0.47-USD0.95) per canister higher, bringing the actual price up to anywhere between VND460,000-VND470,000 (USD21.86-USD22.34) for a 12-kilo tank.
In a bid to get a handle on the gas trade, the Ministry of Finance (MoF)’s Price Management Department has requested that provincial and municipal departments of finance, under the direct management of the central Government scrutinise the industry nationwide. Reports must be sent to the MoF before February 20.
As part of this effort, the HCM City Department of Finance has decided to set up an inspection team to oversee prices in the city.
Around five big gas firms in the city will be placed under scrutiny from February 9 to 21.
Companies caught in the middle?
Ly Tran Dung, Director of Ngon Lua Than Gas Company, one of firms subject to this inspection, said the gas trade is fiercely competitive, and that most companies try their best to lower prices. According to him, when prices rise, it is a necessary result of the rising costs of imports.
“Retail gas prices are dependent on those charged by importers. There are only a few firms allowed to import gas, while there are numerous retailers nationwide. If the price of imports goes up, so will the retail price,” Dung noted.
Concerning the recent consecutive gas price hikes, Nguyen Sy Thang, Chairman of the Vietnam Gas Association said, that there was an increase of USD145 per tonne in the world market in February, bringing them to the record high of USD1,025 per tonne. The domestic market, Thang said, just followed suit.
Recently, the association proposed that the Government and the MoF lower the gas import tax from 5% to 2% to give consumers some relief.
Dung shared that companies who artificially lower their prices may be able to increase their volume of sales, but in the end this could lead to bankruptcy, while those who sell at prices higher than the registered ones would fend off customers.
Several foreign companies have invested in the Vietnamese gas market, including Shell, Total, Unit, Ell and VT, he added, but many of them have pulled out from the market here.
While many companies are selling 12-kilo canisters for between VND440,000 and VND445,000 (USD20.91-USD21.15), others them for around VND470,000 (USD21.86-USD22.34).
According to Dung, this difference in price can be attributed to the fact that there are two types of the product, light and heavy gas. Light gas lasts longer than heavy.
Accountability
Under current regulations the MoF’s Price Management Department has the responsibility to set prices in the industry, basing regulations on import prices.
However, the Ministry of Industry and Trade is responsible for overseeing that these regulations are adhered to.