Vietnam: Petrol price hike deals blow to business recovery efforts
Domestic petrol prices have hit an eight-year record high following the latest price adjustments made on February 21, dealing a heavy blow to ongoing recovery efforts of firms that have borne the brunt of the prolonged COVID-19 pandemic.
According to the latest adjustment, petrol prices rose approximately VND1,000 to VND26,285 per litre for RON95, a popular petrol for consumers, and to VND25,531 for E5RON92 biofuel. This marked the fifth consecutive price hike and the fourth increase this year.
Businesses in dire straits
Enterprises have complained that price hikes would make it difficult for them to recover from the enormous impact caused by the COVID-19 pandemic.
Nguyen Hai Cuong, director of Hai Cuong transport firm in Dak Lak province, told VTC News that almost all operations of the firm have been forced to come to a grinding halt over the past two years due to strict COVID-19 prevention and control measures. Now, with the Government relaxing travel restrictions, the firm has received very few passengers.
“We have to lower fares by one fourth to stimulate consumer demand, but fuel prices have constantly edged up, causing losses to pile up,” Cuong said, adding that the firm is on the brink of bankruptcy unless the situation improves as he must still pay interest on bank loans, road tolls, and other fees.
“The Government and ministries soon have policies to control petrol prices so that businesses can operate with peace of mind,” Cuong suggested.
This view was shared by Phan Huy Su, who runs a transport firm of 7,000 vehicles and approximately 7,000 staff in Dong Nai province. According to his calculation, input fuel, road toll, and fees account for 50% of the overall transportation cost, and any increase in petrol prices will immediately impact the firm’s operations.
“We are in dire straits. We want to sell vehicles, but no one dares to buy. We have now managed to run several hundreds of vehicles to meet the travel need of workers working in industrial zones in the locality,” said Su.
This is not only confined to transport enterprises, but there are also many production enterprises and fishermen feeling the pinch amid the hike in petrol prices.
Duong Van Le, a fisherman in Thanh Hoa province, said that his family has four fishing boats, but he has been forced to suspend the boats setting sail since the Lunar New Year due to unfavourable weather conditions coupled with rising petrol prices.
“The more I go fishing, the more I face loss, so I and many other families don’t dare to set sail at this time,” Le confided.
Similarly, Tran Ngoc Hieu, director of a sugar joint stock company in Son La province, shared that every day he hires dozens of vehicles in order to transport sugar cane to the factory for processing. Rising petrol prices hitting an eight-year record high have therefore prompted transportation and logistics costs to go up, putting new pressure on the firm.
“As raw materials and input costs rise by 9% to 12%, the price of refined sugar will inevitably increase in the time to come,” Hieu explained.
Flexible price management mechanism in need
Furthermore, people are hesitant to travel due to the COVID-19 outbreak evolving in a complicated manner, not to mention the emergence of the Omicron variant and other mutated strains of the virus.
Therefore, Tinh suggested that the Ministry of Industry and Trade and the Ministry of Finance consider and calculate the appropriate Petroleum Stabilization Fund.
“Given the current context, it is not appropriate to hike ticket prices, so the only way is that the State should intervene by using the Petroleum Stabilization Fund to make up for losses in order to reduce petrol prices and help the transportation industry to keep up with its recovery efforts. Only when the transportation industry recovers, will the economy recover,” he said.
Petrol represents a strategic commodity governed by the State, and any changes in petrol prices will impact all socio-economic affairs, including the operation of transport firms. With taxes and fees currently accounting for more than 60% of the cost per litre of petrol, any adjustment to petrol prices should be weighed in to minimise its impact and facilitate business recovery.
In her opinion, senior economic expert Pham Chi Lan welcomed the Government’s current policies aimed at removing business difficulties such as reducing VAT by 2% and lending capital for production. However, she suggested that the Government axe some taxes and fees to stabilise petrol prices to help keep businesses, as well as the national economy, afloat.