Proposing to increase competition in the petroleum trading market
Tue, 28 Feb 2023 14:55:00 | Print | Email Share:
On the Decree amending and supplementing Decree 95/2021/ND-CP and Decree 83/2014/ND-CP of the Government on petroleum trading, the Vietnam Chamber of Commerce and Industry (VCCI) said that only competitive pressure could prevent suppliers from raising prices unreasonably.
Allows retailers to get gasoline from different sources
In the draft Decree, the Ministry of Industry and Trade gave two options, not allowing (option one) and allowing (option two) petrol and oil retail stores to get goods from different sources.
Although option two was unanimously selected, in the report, the Ministry of Industry and Trade was concerned that this regulation would be contrary to the Commercial Law, difficult to control the quality of petrol and there was no unit responsible for supplying gasoline to retail stores when supplies are scarce.
However, VCCI said that these concerns were not really necessary because Decrees 95 and 83 stipulated that retail stores could only sell in the form of agent delivery. The retail sale of items can be carried out in many different forms according to the agreement of the parties, including the form of agency, franchising, and outright purchase and sale. The fact that Decree 95 and 83 does not allow retail stores to do business in the form of outright purchase and sale is contrary to the freedom of business in the Enterprise Law and the Commercial Law.
Moreover, the quality of petroleum can be well controlled without limit ing the 1:1 distribution relationship. When delivering gasoline from tank trucks to retail stores, the parties always take and store goods samples. If there is a problem with the quality of gasoline sold to consumers, it is possible to re-check the samples and trace the source to determine the responsibility of the parties.
Additionally, VCCI said that many petroleum distributors were importing goods from many agencies, so it doesn't make much sense to ask retailers to only import from one source.
From the above reasons, VCCI believed that the revised Decree should allow retail stores to choose a business form, can act as an agent or receive a franchise for a distributor, or can choose the outright purchase and sale form. In the case of a retail store acting as an agent or a franchisee, only one distributor is allowed to import goods. Distributors are responsible for the quality and prices of goods in accordance with the law. If the retail store chooses the outright purchase and sale form, it is allowed to import goods from different wholesalers. At this time, the retail store will be responsible for the quality and price of the goods in accordance with the law.
Redesigning the petroleum market
Additionally, in the draft Decree, the Ministry of Industry and Trade intends to add the regulation that distribution traders can only import goods from three key traders and cannot take goods from other distributors. This regulation is intended to attach the responsibility of the focal trader to supply goods to the distribution traders when the supply of petroleum is difficult.
VCCI thought that this concern was not necessary. If the petroleum supply is complex, the fact that wholesalers prioritize selling in their system or selling to other distributors will not change the overall supply in the market. To deal with the problem of hoarders, it is necessary to increase the flexibility of the market to facilitate traders to move goods from places of excess to places of shortage rather than restrict or hinder the distribution chain.
More importantly, according to VCCI, the policy must deal with the price issue so the parties have business motivation. If the world supply is short or the price is set too low, there is not much difference in who the leading trader sells to.
In addition, the Ministry of Industry and Trade proposed a plan that the State would provide financial support to key petroleum traders, when these businesses make losses to ensure the supply of petroleum for the economy.
According to VCCI, this support is the State's use of budget money to reduce business costs of enterprises while the State still maintains low gasoline prices and collects taxes on petrol.
VCCI considers this unnecessary when there is a much better solution. The State increases the retail price of petrol and oil so that it accurately reflects the costs of the enterprise or gives the enterprise the freedom to decide the price. At that time, businesses will have the motivation to do business without any support.
Along with the above comments, according to VCCI, many management regulations in the petroleum sector are reducing the market's competitiveness. For example, business investment and market entry conditions are too high, making existing businesses in the market worried about the risk of new businesses entering, leading to existing businesses not having much motivation to improve and upgrade services to attract users. Therefore, these issues need to be solved to increase the competitiveness of the market, only competitive pressure will prevent suppliers from raising prices unreasonably.
Simultaneously, VCCI proposed a redesign to the petroleum market in the direction of reducing intermediate levels. The management plan can be considered according to the stages of petroleum business, including: production, import, wholesale, retail, and support services.
By: Business Forum Magazine
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