Fuel tankers at a depot in the outskirts of Hanoi. (Photo: VNA)Some industry experts and traders have long supported a shorter price cycle,saying it will solve the discrepancy between fuel prices in the domestic andinternational markets and be more in sync with fuel trading activities.
Nguyen Tien Thoa from the Vietnam Valuation Association, said the 10-day pricecycle has shown a number of shortcomings and limitations in balancing theinterests of fuel traders, retailers and consumers.
Shorter price cycles, 3-5 days at most, are only the first step in bringingdomestic fuel prices to the same level as the international market,eliminating a delay that encourages some traders to hold onto their stocks towait for higher prices.
Economist Vu Vinh Phu said the delay, at times, created a situation in whichtraders purchased fuel at higher prices but were forced to sell at a lowerprice point. In addition, retailers were also discouraged as their bonuses wereslashed if prices stayed low.
It's simply not possible for traders to sustain the current 10-day cycle asprices continued to fluctuate almost daily in the international market.
"We must start making the transition to a full market-driven mechanism,one in which prices can be adjusted every 5 days or even every day. It's in thebest interest of all stakeholders including traders, retailers andconsumers," he said.
A 10-day price cycle will just discourage traders from stocking fuel out offear of financial losses, according to Phu.
Meanwhile, some voiced their concerns over letting go of all measures to managefuel prices, saying the domestic market was not yet saturated enough with justa few large traders and therefore, not suitable for a fully market-driven approach.
Le Quoc Phuong, former deputy director of the Vietnam Industry and TradeInformation Centre under the MoIT, said it's prudent to gradually reducethe duration of each price cycle, first bringing it down from 10-day to 5-day.
"It will give us the best of both worlds, allowing ministries to intervenein extraordinary situations while making it easier for traders and retailers tooperate," he said.
It's important to note that fuel prices play a large role in the government'seffort to rein in inflation, manage CPI and other macroeconomic factors.
Ngo Tri Long, former head of the Institute for the Study of Market and Priceunder the Ministry of Finance, said while it's clear that the current pricecycle's duration must be shortened as much and as early as possible theGovernment must also realistically evaluate its ability to intervene whenintervention is needed.
From a macroeconomic standpoint, a laissez-faire approach to fuel prices, whilemay benefit traders, retailers and, to some extent, consumers, will make itthat much more difficult for the Government to control inflation andimport/export activities.
They called for scientific studies to be conducted before running a pilotprogramme, small in scale, to gather additional data before nationwide implementation.Another top priority should include the expansion of the country's fuel storageto be able to cover at least 3-6 months of need, creating a larger safe marginon the supply side./.
VNA
