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| Dung Quat Oil Refinery operated by Binh Son Refining and Petrochemical Co Ltd. –— VNA/VNS Photo Huy Hung |
HA NOI (Biz Hub) — The Government has allowed Binh Son Refining and Petrochemical Co Ltd (BSR) to make its own price mechanism after the company has repeatedly called for support to improve the competitiveness of its products.
This decision was signed by Prime Minister Nguyen Xuan Phuc on September 3.
Accordingly, the Government will abolish collection of regulation revenues for BSR's oil products, liquefied petroleum gas (LPG) and petrochemical products. However, in return, the Government will take away other tax incentives as well as make Vietnam National Oil and Gas Group (PVN), the parent company of BSR, stopping its tax subsidy for BSR.
This regulation took effect immediately after signing.
From January 1, 2017, the Government will annul collection of regulation revenue for the company's petroleum products (including for internal consumption) which is currently set at 10 per cent.
Tran Ngoc Nguyen, BSR general director, said the self-regulated price mechanism would help petrol products of Dung Quat oil refinery plant be able to compete with imported products.
Imported products, especially those from enterprises which benefit from import tariff incentives under free trade agreements (FTAs) Viet Nam has signed, have an edge over Dung Quat's products.
Dung Quat's current petrol selling prices include import taxes. Its products are subject to import tax of 20 per cent while under the Viet Nam-South Korea FTA, import tariff on South Korean gasoline was cut from 20 per cent to 10 per cent since the end of last year.
With such tariff reductions, the prices of imported fuels are lower than those of Dung Quat oil refinery. For this reason, a number of local businesses have changed to purchase imported products.
PVN provides a tax subsidy of 7 per cent for Dung Quat under a special financial mechanism.
"When the company can sell products at the market price, traders will buy Binh Son's products and then Dung Quat oil refinery can run at the maximum 110 per cent of its capacity," Nguyen said and noted its advantages such as cheaper transportation and insurance fees, less forex and inventory risks.
Besides, increased sales would also raise the company's tax contribution to the State budget, he added.
The petrochemical company paid VND22 trillion (US$986.5 million) in tax revenue to the State budget last year. In 2016, it expected to contribute nearly VND16 trillion to the State budget.
The Government's decision will also facilitate the company's investment expansion plan as well as pave a better way for its initial public offering scheduled by the end of 2017.
Since the start of its commercial operation in February 2009, Dung Quat Oil Refinery has produced 41.37 tonnes of petrol products. It has earned a total of VND764.63 trillion in revenues and VND6.17 trillion in net profits. — VNS