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Dung Quất wants right to calculate petrol prices

Update: May, 16/2016 - 09:00
A view of Dung Quat Oil Refinery. — Photo nld.com.vn

Viet Nam News -HÀ NỘI — Bình Sơn Refining and Petrochemical Co (BSR), which operates and manages Dung Quất Oil Refinery, has asked the Ministry of Finance for permission to calculate the petrol selling price themselves.

BSR said it has been facing difficulties in petrol consumption due to a sharp decrease of imported taxes when Viet Nam joined in free trade agreements, resulting in removing tax barriers.

Under the Free Trade Agreement (FTAs) with South Korea, which was signed in May 2015, Việt Nam reduced the import tariff on gasoline from South Korea to 10 per cent, from 20 per cent, effective December 20, 2015.

However, products from Dung Quất are still subject to an import tax of 20 per cent, forcing a number of local businesses that bought petroleum from Dung Quất to choose other imported sources. Petrol traders such as Petrolimex, Saigon Petro, Thanh Mễ and Petimex have been rushing to import petrol from South Korea. For example, Petrolimex imported up to 20,000 tonnes to 30,000 tonnes of petrol from the country.

In reality, petrol importers have reduced their consumption of Dung Quất’s products. Last year, Petrolimex imported 90 per cent of petroleum from ASEAN. In December 2015, all of its petrol products were imported from the block. Saigon Petro imported 62 per cent of the total while that of PVOil was 70 per cent to 80 per cent, and Mipeco was 83 per cent.

BSR said Dung Quất had to lower its selling price to compete with imported petrol products, making a huge dent in the business results this year. It forecast that its turnover would be reduced from 7 to 10 per cent this year.

The calculation of petroleum import tax based on weighted average of the tariffs, taking into account Most Favoured Nation (MFN) status and Free Trade Agreement (FTA) has also created a big difference between prices of Dung Quất’s products and those from ASEAN, South Korea and China.

Specifically, petrol traders would have to pay import tax of 18.08 per cent when buying petroleum from Dung Quất, 10 per cent than that from countries which signed FTAs. Moreover, import tax for Dung Quất’s products has been 1.92 per cent higher than retail tax.

BSR said it had to reduce the price of petrol by US$1 a barrel, and of diesel by $2.92 a barrel in the domestic market, to ensure customers’ rights.

Accordingly, BSR asked the ministry to allow Dung Quất to calculate and decide the selling prices themselves. They would provide a suitable import tax without current tax support of 3 per cent to 7 per cent from the government.

In mid-2015, in a report sent to the government, PetroVietnam said the refinery suffered a big loss. In 2010, its loss was around VNĐ3.2 trillion and in 2011 it was VNĐ4.8 trillion. It continued reporting losses of VNĐ6.4 trillion, VNĐ6 trillion and VNĐ7.13 trillion in 2012, 2013 and 2014, respectively. Dung Quất has suffered loss of VNĐ27.6 trillion in its commercial operations so far.

However, since 2009, under a special mechanism, Dung Quất can retain the so-called preferential value in accordance with the import tariff (3 per cent for petrochemical products, 5 per cent for LPG and 7 per cent for petroleum products). This means that Dung Quất can add 3 per cent to 7 per cent of import tax into the selling prices of its products. – VNS

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