Ministry of Industry and Trade is open-minded and responsible in building petroleum business policies

In the Draft Decree on Petroleum Business which is being consulted, the Ministry of Industry and Trade has developed important points on price management. Mr. Nguyen Khac Quyen - Deputy Director of the Institute for Strategy and Policy Research of Industry and Trade, Ministry of Industry and Trade expressed his views on this content.

Petroleum is a conditional business item, which has a strong impact on all aspects of economic and social life. So what is your opinion on the fact that the Ministry of Industry and Trade still maintains the view that petroleum prices must be managed according to the market mechanism but still ensure state management instead of leaving it completely to businesses?

Petroleum is always a particularly important commodity because it not only directly affects production costs but also relates to consumer prices. The fact that the Ministry of Industry and Trade still maintains its view of managing petroleum prices according to market mechanisms but with state management can be understood as a way to balance the interests of businesses and consumers. In addition, petroleum is a strategic commodity, having a profound impact on many economic sectors and social life. Managing petroleum prices according to market mechanisms but still with state management is a reasonable and necessary choice in the current context. This view of the Ministry of Industry and Trade shows the consideration of many important factors.

Managing gasoline prices according to market mechanisms helps to accurately reflect supply and demand and input factors such as international gasoline prices, transportation costs, and taxes, creating fair competition among businesses in the industry. This helps to improve business efficiency, motivates businesses to optimize costs and provide better quality products to consumers.

Mr. Nguyen Khac Quyen - Deputy Director of the Institute for Strategy and Policy Research on Industry and Trade, Ministry of Industry and Trade

However, if gasoline prices are completely left to businesses to adjust, it could lead to major price fluctuations, causing difficulties for both businesses and people, and negatively affecting the economy and social life. In the context of the unpredictable fluctuations of the international market, gasoline prices can skyrocket or fall sharply, leaving gasoline prices floating would destabilize the macro economy and affect people's lives, especially low-income groups. Meanwhile, if controlled too tightly, it could reduce the competitiveness and innovation motivation of businesses.

Therefore, state intervention to stabilize prices, regulate the market and protect people's interests is necessary. The state can use tools such as the Petroleum Price Stabilization Fund, adjust taxes and apply other support policies when prices fluctuate greatly. This model ensures that the petroleum market is not completely free, but also does not constrain businesses, creating a reasonable balance between the free market and state management.

In short, maintaining state management in regulating gasoline prices is the optimal solution, both ensuring correct reflection of market rules and maintaining socio-economic stability.

There are opinions that if gasoline distribution businesses are allowed to buy from each other, the management agency will not be able to control the supply source. What is your opinion on this issue?

First, it must be affirmed that this regulation is not new but has been clearly stated in Clause 3, Article 15, Decree No. 83/2014/ND-CP dated September 3, 2014 of the Government on petroleum trading (Decree No. 83), effective from 2014. The regulation that petroleum distributors are not allowed to buy goods from each other but can only buy goods from key traders helps stabilize supply and reduce costs.

On the other hand, distributors should not be allowed to buy goods from each other, because as of August 2024, the whole country has 298 petroleum distributors, while the number of key traders is 34 (a decrease of 2 traders compared to the beginning of 2024 (1 trader had its Certificate revoked and 1 trader's Certificate expired). With a large number, up to 298 enterprises as present, if petroleum distributors are allowed to buy goods from each other, it will be very difficult for the authorities to control the output, origin and quality of petroleum.

In fact, in recent times, many petroleum distribution enterprises have taken advantage of petroleum purchase and sale contracts to borrow capital for various purposes, creating revenue for petroleum distributors to prove their financial capacity when borrowing from banks. Therefore, the purchase of petroleum distribution enterprises will not ensure the right goal of petroleum business to serve the consumption needs of the people.

The buying and selling of gasoline between gasoline distributors actually causes the same amount of gasoline to be consumed on the market to be included in the gasoline consumption reports of many gasoline distributors, creating a "virtual" consumption figure on the market.

Not allowing distributors to buy from each other helps to organize the gasoline distribution system vertically from the source to the distribution to the retail stage, helping the gasoline wholesaler to accurately calculate the amount of gasoline consumed domestically to purchase from domestic and foreign manufacturers to serve domestic consumption; the state management agency can accurately determine domestic consumption needs to allocate the total annual source to the gasoline wholesaler to ensure and control the supply for domestic consumption.

Therefore, distributors are only allowed to purchase goods from sources to strictly control the quality of goods, ensure the supply of gasoline for domestic consumption, protect consumers and protect legitimate businesses. In addition, this regulation aims to make the gasoline trading market transparent, avoid increasing costs, increasing prices, affecting people's lives.

The Ministry of Industry and Trade plans to submit two pricing options to the Government, including the option of enterprises setting their own prices; reporting to the Government on the distribution enterprises' proposals to buy goods from each other. How do you evaluate the receptiveness and acceptance of the Ministry of Industry and Trade in drafting the Decree, which is considered extremely difficult at present?

Listening to and accepting opinions from stakeholders, especially from distribution businesses, shows a willingness to learn and responsibility in developing petroleum business policies. This is a positive move from the Ministry of Industry and Trade.

The Ministry of Industry and Trade is open-minded and responsible in building petroleum business policies. Photo: Thanh Tuan

Specifically, the Ministry of Industry and Trade has listened to many perspectives and been flexible in advising on policy development: In the context of the petroleum industry being a highly complex field, with a great impact on many industries and social life, listening to opinions from businesses, experts, and related parties is extremely necessary. This shows that the Ministry of Industry and Trade does not only rely on old regulations but is also willing to update new options that are suitable for reality. The introduction of two pricing options shows that the Ministry is considering between expanding freedom for businesses and maintaining the state's management role.

Balancing the interests of the state and enterprises: By presenting two options for pricing mechanisms, including one that allows enterprises to set their own prices, the Ministry of Industry and Trade is demonstrating its efforts to find a balance between the state’s management role and the interests of enterprises. This is an important step forward, as some petroleum enterprises have expressed dissatisfaction with the current pricing management mechanisms, arguing that they reduce competitiveness and flexibility in adjusting selling prices.

Introducing two options, including one that allows businesses to set their own prices, could help create fair competition and drive growth for the industry. However, it is important to have a strict control and monitoring mechanism to ensure that prices are not manipulated and that consumer interests are protected. This approach not only meets the needs of economic development but also creates conditions for businesses to operate more flexibly and creatively.

Receptive attitude towards the proposal of mutual purchase and sale between distribution enterprises: This shows that the Ministry of Industry and Trade is not conservative in its traditional approach, but is willing to consider new solutions that are suitable to the development and actual situation of the market. The flexibility in accepting the Government's report on this issue shows that the Ministry is aware of the importance of ensuring a stable and transparent supply of petroleum, while creating conditions for enterprises to operate more effectively.

Recognizing current challenges: The Ministry of Industry and Trade also acknowledged that it is extremely difficult to develop a suitable decree for the petroleum business sector. This is a signal showing a clear awareness of the challenges facing this market, including fluctuations in international prices, reserve issues and supply uncertainties.

The receptiveness and willingness of the Ministry of Industry and Trade in the process of developing the Decree on petroleum trading is a positive step. It not only creates transparency in the policy-making process but also creates conditions for relevant parties to contribute their opinions, ensuring that the final decree will meet the requirements of reality and create a stable and effective petroleum market.

As a research and policy development unit of the industry, what is your opinion on improving the efficiency of petroleum product management in the coming time with the ultimate goal of ensuring enough petroleum for people's needs?

Petroleum is a very important commodity, directly and strongly affecting the economy. Therefore, enhancing the management efficiency of this commodity is always a focus of the Ministry of Industry and Trade. In the current context, to improve the management efficiency of petroleum, we propose 6 important groups of solutions.

First, improve the national reserve system: Ensuring a stable supply of petroleum products depends heavily on the national reserve system. The government needs to invest in and strengthen strategic reserve capacity, including national reserves, and require businesses to have sufficient compulsory reserves to cope with fluctuations in the world market or unexpected incidents. This helps to minimize the risk of petroleum shortages due to disruptions in the international supply chain or emergencies.

Second, increase transparency in price management: Gasoline prices are a very sensitive factor and directly affect people's living expenses as well as production and business activities. Therefore, transparency in the pricing mechanism is necessary to ensure the trust of both businesses and consumers. Clearly disclosing the price components, including import prices, taxes, transportation costs, and business profits, will help eliminate suspicions of price manipulation.

In addition, it is advisable to consider adjusting the frequency of price updates in a more flexible manner, to reflect fluctuations in the international market more quickly but still be predictable and stable for businesses and consumers.

Third, develop infrastructure and logistics: Improving the efficiency of petroleum management requires investment in logistics infrastructure such as ports, warehouses, and petroleum transportation networks. Uneven distribution of infrastructure can increase transportation costs and time, thereby affecting retail prices. The government should encourage investment in these infrastructures and create conditions for private enterprises to participate in developing the logistics system.

Fourth, establish a transparent and closely monitored inter-enterprise purchasing mechanism: If the Government agrees to allow distribution enterprises to purchase goods from each other, it is necessary to establish a transparent monitoring system and a complete reporting tool so that the management agency can accurately grasp the volume of goods circulating. This system not only helps ensure transparency but also prevents speculation or manipulation of market prices.

Fifth, rapidly develop alternative energy and reduce dependence on imported petroleum: A long-term direction is to promote research and development of renewable energy, such as biofuel, electricity, or hydrogen. This will not only reduce the pressure on petroleum imports but also help Vietnam move closer to its goals of sustainable development and environmental protection. The government can consider policies to encourage businesses to invest in clean fuel production technologies and alternative energy systems.

Sixth, strengthen inspection and supervision of gasoline quality: An issue that cannot be ignored is the quality of gasoline on the market. Regular inspection and supervision measures are needed to prevent the situation of poor quality, counterfeit or improperly mixed gasoline. This not only protects the interests of consumers but also maintains the stability and reputation of the market.

Training and capacity building: Finally, to effectively manage the petroleum market, it is necessary to invest in training human resources of state management agencies as well as technical staff at petroleum enterprises. Capacity building training programs will help them access modern management technologies, as well as international standards in the management and operation of petroleum systems.

In general, to ensure sufficient petroleum supply to meet people's needs, it is necessary to combine a series of solutions from strengthening the reserve system, improving infrastructure, promoting alternative energy and ensuring transparency in price management. By applying the above policies, Vietnam can build a stable, competitive and sustainable petroleum market in the future.

Thank you very much!

Source: https://congthuong.vn/ong-nguyen-khac-quyen-bo-cong-thuong-cau-thi-va-trach-nhiem-trong-xay-dung-chinh-sach-kinh-doanh-xang-dau-351193.html