Research on abolishing the Petroleum Price Stabilization Fund

This has existed for many years but has not been handled promptly, along with the shifting of responsibility and lax management, affecting the effectiveness of the use of the Petroleum Price Stabilization Fund.

The inspection results on January 4, 2024 by the Government Inspectorate showed that the Ministry of Industry and Trade did not have timely opinions to amend and supplement the method of determining the deduction and expenditure levels for a unit of output when stabilizing prices according to Joint Circular No. 39/2014/TT/BCT-BTC stipulating the method of calculating the base price; the mechanism for forming, managing, using the fund and operating gasoline prices according to the provisions of Decree 83/2014/ND-CP and Circular No. 103/2021/TT-BCT, leading to the fact that from 2017 to 2021, the joint Ministry of Industry and Trade and the Ministry of Finance decided on the deduction and expenditure levels of the gasoline price stabilization fund without legal basis.

Specifically, the joint ministries decided to spend more than VND1,142 billion on price stabilization when prices had not yet increased and spent more than VND318 billion on price stabilization than the price increase; in the management period from January 1, 2017 to before 3:00 p.m. on April 23, 2018, they issued unclear price management documents, leading to 19/27 key petroleum traders setting aside the Petroleum Price Stabilization Fund for the wrong type of Ron 95 gasoline with an amount of more than VND1,013 billion and spending more than VND679 billion on the fund.

Not only that, due to the management agencies of the Petroleum Price Stabilization Fund shirking responsibility; lack of regulations and coordination rules in management as well as slow handling of fund violations by petroleum traders, 7/15 petroleum traders used the fund for the wrong purpose of price stabilization, not transferring it to the fund account but leaving it in the payment account of the enterprise regularly, for many periods before returning the fund with an amount of more than 7,927 billion VND, of which, 3/7 petroleum traders were administratively sanctioned by competent state agencies three times or more, three petroleum traders made deductions and used the Fund for the volume of petroleum exceeding the volume on the books, leading to incorrect fund deductions of more than 4.7 billion VND and incorrect fund use of more than 22.5 billion VND, etc.

The management and use of the Petroleum Price Stabilization Fund have not been effective in recent times. The Fund operates on the principle of setting aside funds first and spending later through prices, which does not help reduce the cost of petroleum. While other countries have switched to storing petroleum, Vietnam has stored it in the Petroleum Price Stabilization Fund, and what happened was predicted in advance.

On the other hand, for the petroleum market to operate effectively and avoid supply disruptions, in addition to petroleum reserves, it is necessary to re-establish the petroleum market, in which enterprises can self-account. At the same time, it is necessary to cut down on intermediaries, going straight from supplying goods to retailing to minimize costs and increase competitiveness in the market.

It can be seen that the Petroleum Price Stabilization Fund is collected through the retail price of petroleum, which is money paid by people with the aim of stabilizing prices. Spending is done when the base price is higher than the current retail price, or the price increase affects socio-economic development.

However, in reality, there are times when the fund's operations lack transparency, creating loopholes for some businesses to misappropriate capital, creating many negative aspects in financial management, causing market instability.

Therefore, in the long term, the State needs to study the elimination of this fund so that the domestic petroleum market can operate according to market mechanisms and gradually approach the price of petroleum on the world market.

Source