Draft decree on petroleum business forgets retail businesses?

Do wholesalers and distributors determine retail prices?

In the petroleum business, there are 3 levels: the main enterprise (production and import), the distribution enterprise and the retail enterprise. Some retail enterprises think that it is unreasonable that the main enterprise that creates the source (level 1) has both a distribution system (level 2) and a retail store chain (level 3). The distributor also has a system of retail stores and agents (outside the system - level 3).

Meanwhile, the agent level (petrol retail enterprises - level 3) only has the right to retail at stores. According to the draft decree on petroleum business, the main enterprise has the right to set both wholesale and retail prices, while the distributor has the right to set retail prices for the system. Thus, the retail price of the retail enterprise will be decided by the main enterprise and the distribution enterprise. Meanwhile, the force that brings each liter of petrol and oil to the hands of consumers, the retail enterprise, has no rights.

Many gasoline retail businesses recommend that pricing authority be given to three distribution levels to avoid monopoly.

Mr. Nguyen Xuan Thang, Director of Hai Au Phat Petroleum Company (Lam Dong), commented: The draft is still confused in regulations on decentralization, costs, prices, etc. Specifically, giving all the right to decide prices to the focal point is not objective, can easily cause market manipulation and does not ensure free trade. "In my opinion, it is necessary to implement 3 levels of costs and selling prices correctly: costs and wholesale prices at level 1 are determined by the wholesaler; costs and wholesale prices at level 2 are determined by the distributor; costs and retail prices at level 3 are determined by the retail enterprise. In addition, the purchase and sale of large quantities of gasoline and oil without going through the pump must be done by the retail enterprise. Instead of only allowing the wholesaler and distributor enterprises to do so. Retail enterprises have large commercial customers and are the final output in the distribution chain, but are not allowed to sell wholesale, which is unreasonable. The Decree should clearly separate the 3 levels of costs and which level is responsible for that level, then the market will be stable," Mr. Thang emphasized.

How many gas stations have not yet issued electronic fuel invoices?

The lack of sanctions on pricing rights and sales obligations as in the new decree will allow key enterprises with the authority to set their own wholesale and retail prices, which is a form that only benefits level 1 enterprises and has a very high risk of "squeezing" retail enterprises. From there, it is easy to repeat the situation of supply disruption when world prices skyrocket, or discount of 0 VND...

The leader of a petroleum retail company cited that in 2022, when world prices increased sharply, the fee adjustments had not been revised or updated, but in the year-end report, large, market-dominating enterprises still reported large profits while a series of small and medium-sized enterprises all suffered heavy losses. "This proves that the cost of retail sales has been taken up by the upper levels in the distribution system, completely eliminating the minimum cost for retail. Meanwhile, the regulation in Circular 103, the standard business cost includes both wholesale and retail," he said.

Giving power to businesses to dominate the market is inappropriate.

Commenting on the draft, Mr. Van Tan Phung - Chairman of Dong Nai Petroleum Association - said that to ensure fairness, it should be stipulated that key enterprises must ensure import sources according to the allocation. In addition, to create a competitive position, large key enterprises only sell to retail units within the system, and are not allowed to sign contracts to sell to retail enterprises outside. If they want to sell to units outside the system, they must go through a distributor (level 2) to sell to retail enterprises, otherwise transfer pricing will occur. In addition, Mr. Phung also proposed that the Ministry of Industry and Trade needs to review the system of key enterprises. Because in the past, according to the conclusion of the Government Inspectorate, many key enterprises have committed prolonged violations in managing the Price Stabilization Fund, in creating sources, supplying, etc.

"The petroleum market needs to be reorganized based on reviewing and purging weak businesses that have been "catching thieves" with bare hands for a long time due to lack of capacity. In particular, it is necessary to review distribution businesses that are the backyard of the main players. Without reviewing, continuing to give the main players too much power, I am afraid that the petroleum market will not be stable, have healthy competition and be equal as expected", Mr. Van Tan Phung shared and suggested that distributors buy goods directly from domestic factories, and should not be forced to buy through the main players, in order to reduce costs.

"Distributors are not allowed to import, but they have warehouses, finance, tankers... to be able to buy goods directly from the factory. Why do they have to take a detour, buying through a middleman, when their warehouse is located right next to the refinery?", Mr. Phung wondered.

Some experts believe that while the Vietnam National Petroleum Group holds more than 50% of the market share, it is a monopoly, but giving businesses the right to set wholesale and retail prices is inappropriate. Therefore, there should be sanctions in choosing to sign contracts, rights and responsibilities for sales between the 3 stages: distributor - distributor - retailer. The costs in each stage need to be transparent.

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