Fuel retailers ‘forced’ to sell despite huge losses

“At first we thought the disruption was short-term, but now it has lasted for over a year,” said Giang Chan Tay, CEO of fuel retailer Boi Ngoc, at a forum on Friday.

Many retailers have run out of cash, he said, adding that some had sold their stations or had to sell their own land to keep the stations running.

Businesses are being “forced” to sell by authorities, even though they are deep in losses, he added.

Nguyen Thi Rim, CEO of fuel retailer Giang Chan Hung, said that she wondered if retailers would receive compensation for the losses they have suffered which is estimated at trillions of Vietnamese dong.

“On what grounds are private retailers having to sacrifice while state-owned companies receive financial aid for the losses,” she asked representatives of the Ministry of Industry and Trade at the forum.

Distributors who buy from fuel suppliers and sell to retailers also said that they had been losing money.

Hoang Trung Dung, CEO of Additives and Petroleum Products Development, said that ever since the government shortened the retail price change duration to 10 days, the commission has been squeezed for both distributors and retailers.

Suppliers seem to be holding on to their inventory, waiting for a price hike, he said, adding that commissions seem to decline when prices are raised.

“Thousands of trucks can be seen at the suppliers but they cannot get access to fuel,” Dung said.

Van Tan Phung, chairman of distributor DopeTrad Corp. in southern Dong Nai Province, said that suppliers are the main culprits in the disruptions of the fuel market, but that the problematic management by the authorities also contributed to the problem.

He added that the government should intervene less in the market.

Since last year Vietnam’s fuel market has gone through at least three major supply disruptions when many retailers shut up shop saying that they ran out of inventory.

Starting from mid-February the situation seemed to improve as retailers received a commission of VND1,000-1,500 ($0.042-0.063) per liter, compared to zero in some weeks last year.

But a drastic policy change is still needed to ensure smooth operations going forward, retailers said.

Analysts said that retailers, distributors and suppliers should not blame each other for the issues.

“The fault lies in the management of the government,” he said, adding that the “outdated” governance method is the main reason retailers have been reporting losses for over a year.

The market should be prioritized, and the government should give businesses more autonomy, he said.

Economist Vu Dinh Anh said that the fuel market in Vietnam is heavily influenced by the government, and changes need to be made to increase competition and reduce the dependency of retailers on suppliers.

The government needs to allow fuel businesses to withdraw from the market if they suffer heavy losses, he added.

Tran Dinh Thien, former head of the Vietnam Institute of Economics, said that businesses should be allowed to determined their own selling prices.

Nguyen Minh Tien, head of the price management agency under the Ministry of Finance, said that the increased expenses for bringing fuel to customers have been factored into retail prices to ensure retailers can cover their costs.

But Tran Duy Dong, head of the domestic markets agency under the Ministry of Industry and Trade, said that if a minimum commission policy is imposed as retailers have proposed, retail prices will rise and hurt consumers.

A new decree on fuel is being discussed to improve current policies, he said, adding that some changes that are being considered include whether to factor in more expenses of retailers and give them more autonomy in determining prices.