Rising fuel prices new source of trouble for businesses
Rising fuel prices new source of trouble for businesses
Surging fuel prices are increasing the pressure on companies which were already struggling to cope with months of plunging revenues due to Covid-19-restrictions and social distancing.
A staff pumps gasoline into a motorbike in District 1, Ho Chi Minh City, April 27, 2020. Photo by VnExpress/Quynh Tran |
Still operating at only 30 percent of pre-pandemic levels, Hong Ha Transport in the northern province of Phu Tho has seen its financial situation worsen following the fuel price hikes.
"We do not have many customers, and revenues are not enough to cover expenses," Cao Viet Tu, a company spokesperson, told VnExpress International.
The company has increased fares and would do so again if fuel prices continue to rise, he said.
"We were caught by surprise and did not have a plan to deal with the fuel price hikes."
Hanoi transport firm Sao Viet is in a similar plight with services resuming so far on only 20 percent of routes.
Do Van Bang, CEO of Minh Thanh Phat, which operates the company, said: "Our buses are mostly empty, and fuel prices are high. We don’t know what to do".
With travel demand being low, Bang cannot raise fares either, but the company cannot keep suffering losses for too long and will have to consider hikes if fuel prices continue to rise.
Fuel prices have risen by 40-50 percent this year to a seven-year high.
Global prices have shot up since supply is failing to meet the demand stimulated by the resumption of economic activities as Covid-19 is gradually being controlled.
Since last month fuel prices have been adjusted upward four times in Vietnam, putting pressure on the fuel price stabilization fund.
"Businesses are scrambling to lower all costs to survive," Tran Duc Nghia, CEO of Hanoi logistics firm Delta International, said.
The 40-50 percent increase this year is like "a blow" to transport companies, and they need to hike prices by 5-10 percent to meet the increased expenses, he said.
But it is not easy to raise fares right away since contracts exist, he pointed out.
The rise in logistics costs has a knock-on effect on other sectors too.
Phan Phuc Son, deputy director of the Saigon – Ha Long Hotel in the northern province of Quang Ninh, has seen the cost of food, shampoo and soap rise following the fuel price hikes.
"We plan to reopen at the end of this year with special offers like reducing room rates by 30-50 percent to stimulate tourism demand. But with the increase in costs, we will be forced to increase rates".
This could keep guests away, he feared.
A beverage company executive in HCMC, who asked not be identified, said some suppliers have asked to increase prices by 10-30 percent due to increasing fuel costs.
"We are under extreme pressure to raise our prices if suppliers continue to demand higher rates."
Some experts have suggested cutting taxes and fees, which account for around 60 percent of fuel prices, to ease the pressure on businesses and consumers.
Hoang Van Cuong, vice president of the National Economics University in Hanoi, said: "Many sectors have been suffering due to the pandemic, and now fuel prices. We need to stabilize fuel prices to boost economic recovery".
Tran Van Lam, member of the National Assembly’s Finance Budget Committee, said a major plan to reduce taxes and fees on fuel would help control inflation.
