HCM CITY (Biz Hub) — The local business community was shocked to discover this week that the price of petrol had increased for the fifth time this year.
However, Ministry of Finance officials have said the price jump was necessary.
"The price had been restricted by using the price stabilisation fund to prevent adverse impact on the entire society, especially enterprises," Nguyen Anh Tuan, head of the Ministry of Finance's Price Management Department, said.
Speaking at a press conference on Tuesday, Tuan said that since June 23, international petrol prices had been rising, hitting US$126 per barrel on July 1.
Recently, however, the international petrol price fell $2-3 per barrel.
"The price increased by VND1,430 per litre and climbed to VND26,140 per litre or $1.2," Nguyen Van Tiu, chairman of Tu Luc 1 Petrol and Oil Corporation's management board, was quoted as saying in Tuoi Tre (Youth) newspaper.
Ngo Tri Long, an economics expert, said that Viet Nam should keep prices stable because of current economic difficulties for residents and businesses.
"Petrol prices will affect other prices, especially for essential goods, as well as inflation for the rest of the year," Long said.
Long also criticised the way the petrol price is calculated, which is based on a 30-day period.
"Local petrol prices go up while international price go down," he added.
The deputy minister of Industry and Trade, Do Thang Hai, said that management of petrol prices would be changed once a new decree is issued.
The decree will allow local petrol prices to be equivalent to international prices.
He also suggested that the Ministry of Finance cut petrol taxes, and to temporarily stop the requirement that companies must pay VND300 per litre for the price stabilisation fund. This would help reduce difficulties for enterprises.
With the new price of petrol, the Thang Loi International Garment Joint Stock Company will pay more VND1 billion ($47,000) every month.
"This won't include prices for transport because many owners have informed us that they will increase transport fees very soon," Ngo Duc Hoa, chairman of the company's management board, said.
The cement industry will be hit strongly because its expenditures for transport for both materials and products are very high.
The head of one cement company's business department said that his company has to pay VND20-22 billion ($1 million) monthly for transport.
"Transport and logistics businesses will suffer the most from the petrol price increase because petrol takes 30-35 per cent of expenditures," Do Xuan Quang, chairman of Viet Nam Logistics Association, said.
"And of course, extra expenditures will be paid by end-users," he added. — VNS