With many state-run giants operating in the fuel, gas, and power sectors repeatedly announcing price hikes with unconvincing reasons on their products, economic experts have urged that an independent market supervising committee be set up to curb the phenomenon.

A filling station in Da Nang City hangs up a banner that reads "Temporary close" on August 13, 2012 prior to the time gasoline retailing price is hiked by VND1,100 a liter Photo: Tuoi Tre

Nowadays local consumers worry that any time open a newspaper, there is large likelihood that they will see a price hike announcement from one of the said utility companies.

Petroleum retailing prices have seen three straight price increases in less than a month, while cooking gas prices have also risen by 15 percent over the last month.

The wholesalers repeatedly lament of losses due to soaring global prices whenever they want to hike prices, an excuse which consumers can hardly believe and sympathize with, as the former usually refuses to cut prices, or only offer just a small drop, when world prices slump.

“The power, fuel, and gas markets have yet to operate in accordance with an adequate market mechanism,” stated Dr. Pham Dinh Cung, deputy head of the Central Institute for Economic Management, in a recent talk with Tuoi Tre.

Blaming the problem on government management, Cung said the case of Petrolimex, the country’s largest fuel wholesaler, is a typical example.

The wholesaler holds nearly 60 percent of the market share, yet some officials have said it is not a fuel monopoly, said Cung.

“Even so, such a large market share puts Petrolimex in a dominant position, which helps it become the decision-maker for fuel prices of the whole market,” he elaborated.

Local wholesalers always seek the government’s help whenever they face operational difficulty, and raising prices seem to be the only thing they can do to escape from tough spots.

“It’s not a real competitive market. Businesses are supposed to review their operations, try to cut expenses to avoid losses, and sometimes have to try not to increase prices to keep consumers. Such a scheme does not exist in Vietnam,” concluded Doanh.

Sharing his view, Professor and Doctor Nguyen Van Nam said the price management system in Vietnam is a paradox, as administrative agencies will approve price adjustments based on proposals from the wholesalers.

“But the proposals are always made in a way that wholesalers will not incur losses, while a business has to be responsible for its losses rather than calling for the government’s assistance,” said Nam, who is an expert on the Law on competition.

Independent committee

Prices are currently under the management of many agencies, such as the Price Management Agency under the Ministry of Finance, and the Domestic Market Agency under the Ministry of Industry and Trade, but Cung, the expert from the Central Institute for Economic Management, said the system is still problematic.

“It doesn’t sound right for the Price Management Agency to determine prices when it has no idea about the businesses’ operations,” he said.

Meanwhile, the Ministry of Industry and Trade, as well as other ministries, is a three-in-one utility, or an institution which conducts three functions simultaneously.

“The ministry is the owner of the state-run enterprise, a market supervisor, and a lawmaker for the market management -- three functions that may collide with each other.

“So it’s essential that an independent committee be established to supervise the market,” he urged.

“The committee should be under the management of the National Assembly, and be granted the right to release policies that determine prices in accordance with real market forces.”

Nam, the competition law expert, added that the committee should not be set up to continue protecting the rights and interests of state-run enterprises via price increases.

“Instead, it should listen to consumers and solve their needs,” he asserted.

Source: Tuoi Tre News