Business
Petrolimex accused of misusing $60 million in funds
  • | dtinewa | January 09, 2011 09:19 PM

The petrol company, Vietnam National Petroleum Corp (Petrolimex), has been blamed for misusing VND1.2 trillion (USD60 million) worth of petroleum stabilisation fund.

Petroleum market is under pressure

The Ministry of Finance made the accusation after Petrolimex, Vietnam’s largest petroleum trader, complained of profit losses amounting to VND2,400 (USD0.12) per liter sold.

Guidelines set by the ministry require that companies set aside a certain amount of their funds to stabilise prices in the domestic market. According to the Ministry of Finance, Petrolimex failed to to do so, while other petroleum traders have complied with the rules. These rules were put into place in order to protect the domestic market from the volatility of global price fluctuations.

The ministry has sent a dispatch to the firm demanding that it correct its practices.

“Part of the revenues of each Vietnamese petroleum company is to be used for the stabilisation of domestic prices. These funds should not be used to compensate these companies for losses resulting from dubious or unwise trade deals. In the end, an audit will bring out the truth. It is unfair to use profits to compensate traders for imprudent business transactions,” said a ministry official.

Petrolimex executives, on the other hand, say the accusations are a result of unclear regulations. Bui Ngoc Bao, General Director of Petrolimex, has proposed that the Ministry of Finance give a detailed outline of exactly how funds should be allocated.

Bao emphasised that if domestic petroleum prices do not reflect fluctuations in the global market, it will result in an unfair burden on the petroleum trading companies of Vietnam.

In fact, the total amount of funds required to be set aside by these companies may not reach the the amount estimated to be sufficient - between VND5 trillion (USD250 million) and VND6 trillion (USD300 million) - to stabilise Vietnam’s domestic markets. The result could be a repeat of 2008, the year we saw a false petroleum shortage.

It is estimated that Petrolimex has lost over VND700 billion (USD35 million) because of soaring prices in global markets compounded by changes in the value of foreign currencies.

Meanwhile, Vietnamese consumers contribute VND300 per liter of petroleum to this price stabilisation fund. This contribution is included in the price they pay at the pump, which companies are authorised to collect. Although it adds a bit to the price of each litre of gasoline the consumer buys, it is meant to protect the consumer from global price hikes.

On December 23, 2010, the Ministry of Finance decided to cut the import tariffs on gasoline from 12% to 6%. The taxes on diesel fuel were reduced from 5% to 2%, and on kerosene from 10% to 4%. This reduction, the second of its kind in a month, was intended to give relief to petroleum dealers.

The Ministry of Finance maintains the current allocation rate for the stabilisation fund at VND1,200 (USD0.06) per liter of gasoline, and between VND700 and VND1,200 per liter for other oil products.