Insiders blame unfair policies as fuel giant posts hefty profits

Insiders blame unfair policies as fuel giant posts hefty profits

With Petrolimex, the country’s largest fuel wholesaler, reporting a whopping profit in the first nine months of this year while local consumers still have to suffer unreasonable price hikes, insiders criticize that the state-run giant remains favored by the policies that oversee the fuel trading.

Petrolimex’s latest financial report shows that the company enjoys a pretax profit of VND1.57 trillion (US$74.06 million) in nine months, a 50 percent increase compared to the same period last year.

Earnings from the fuel trading sector account for 45.7 percent, or VND722 billion, of the total figure.

In the third quarter of this year alone, post-tax profit topped VND637.53 billion, up by 44.82 percent compared to a year earlier.

Insiders and members of the public thus wonder where the earnings come from as fuel retail prices in the year to date have repeatedly been adjusted and the management policies seem to have left Petrolimex with many advantages when the market fluctuated.

Fuel expert Nguyen Ngoc Son said a quarterly profit of billions of dong is too large for a company that trades commodities under the government’s price stabilization program.

It is also unacceptable when consumers have to suffer repeated and unreasonable price increases, he added.

A92 gasoline retail prices have been increased four times and reduced the same number of times from December 28, 2012 to August 22, 2013. But the total reduction is only VND1,520 per liter, compared to the total increase of VND2,640 per liter.

Analysts said the huge profits of Petrolimex also come from the fuel price stabilization fund, contributed by consumers to make up for the losses of fuel wholesalers.

In late March, when global fuel prices soared and local wholesalers incurred steep losses, the Ministry of Finance allowed wholesalers to use VND2,000 from the fund to make up for the loss of every liter of gasoline they sold.

But when the world prices cooled down, domestic fuel prices remained unchanged and the wholesalers thus raked in hefty profits from the fund.

“This is unreasonable because the price stabilization fund is intended to make up for wholesalers’ losses, not to bring in profits for them,” Son said.

Better management

Petrolimex chairman Bui Ngoc Bao defended that its profits are the result of the company’s effort to save costs and the more open fuel management mechanism.

“In April to date, the fuel price management policy has been improved and wholesalers do not have to wait for so long to be allowed to adjust their retail prices,” he said.

Bao added that the relatively stable global fuel prices also contributed to the company’s earnings.

Another expert who wished to remain anonymous said the regulator authorities have been confused and under pressure in managing the fuel trading sector.

If they refuse to allow businesses to hike prices, they will receive complains from them. But if they do so, it is the consumers who lament on the adjustment, he said.

“The management agencies are also under pressure of stabilizing prices and the macro-economy, so when the world fuel market fluctuates, it can take them several days to a week to release the final decision,” he added.

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