Many of us don’t like meetings, as many may become a good place to fall asleep. But a recent meeting of a joint committee of the ministries of finance and industry-trade in Hanoi turned out to be very interesting, catching the attention of millions of Vietnamese people, including the press.

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Without the 2-hour meeting, the prices of petroleum products would have been raised more than the current rates, even by 200-300 percent, as local petroleum wholesalers were empowered to determine the price hike range in July this year.

It has also helped save the day for 87 million Vietnamese people, though it still allowed the third retail price hike for petroleum products in recent months.

“The base prices used for the calculation of the retail prices of local petroleum products have surged by VND1,482 per liter, VND947 per liter, VND1,088 per liter, and VND754 per liter for gasoline, diesel oil, kerosene and heavy oil respectively,” Nguyen Tien Thoa, head of the Price Management Department under the Ministry of Finance, told Tuoi Tre.

But the real-life price hike was just VND650 per liter, VND300 per liter and VND450 per liter for gasoline, diesel oil, and kerosene. Heavy oil prices remained unchanged.

Regarding the fact that local consumers are paying VND5,000-6,000 in taxation and fees for every liter of petroleum products they buy, Thoa told Tuoi Tre the current tax rates imposed on petroleum products still lag behind the benchmark tax rates set by the Ministry of Finance.

“The ministry is under pressure to balance the state budget income/expenditure, let alone the pressure from external factors, such as a global petroleum price hike.”

“The tax rates must be 20 percent for gasoline and kerosene, and 15 percent for diesel oil and heavy oil, according to the benchmark rates. But the actualized rates are at 12 percent for gasoline and kerosene, 10 percent for diesel oil and 12 percent for heavy oil,” Thoa said.

However, the Ministry of Finance will consider a tax reduction if the future world oil prices continue to rise, Thoa added.

Joining forces

The meeting also relieved the burden on many local petroleum wholesalers who have been under the public’s fire for raising the retail petroleum price for the fourth time in a row, with a total rise of VND3,100 per liter of gasoline.

“In fact, local petroleum companies have to share the burden with the ministry and consumers as they have yet to include the allotted profit rate of VND300 per liter of petroleum products sold at retail prices,” Thoa said.

“Meanwhile, their operational cost, which is still capped at VND600 per liter, is lagging behind the rising actual cost,” he added.

Thoa also clarified a statement made by Finance Minister Vuong Dinh Hue at a meeting late last year that he will operate the pricing mechanism of local petroleum products “for the sake of 80 million Vietnamese people”, not for petroleum wholesalers.

“As I was at that meeting, I think the statement should be considered in a broader view.”

“For the sake of the Vietnamese people, firstly, we need to guarantee sufficient supply; secondly, a far-reaching retailing network of filling stations; and thirdly, the price must be at an acceptable rate for the national energy security situation,” he added.

Deflation? Are we there yet?

Recently, many local experts have voiced their concerns over possible deflation in the national economy, citing the fact that the consumer price index (CPI) has turned negative for two months.

Vietnam’s CPI in July continued to post a negative growth rate of 0.29 percent, the second drop in a row, from a minus 0.26 percent growth in June, the first drop in 38 consecutive months.

Deflation is a decrease in the general price level of goods and services, or the CPI. It occurs when the inflation rate falls below 0 percent, or at a negative rate.

However some experts also said that, theoretically, deflation will only come when the CPI sees negatives growth for six months in a row.

Practically, there are more solutions.

State agencies late last month gave the green light to a price hike of petroleum products, plus another one for a rise in cooking gas and electricity in early July.

The last wave of price hikes in petroleum products last month triggered new rounds of price level increases, thus resulting in positive CPI growth in August, as expected by many economists and local businessmen.

Do Vinh Phu, chairman of the Hanoi Supermarket Association, said early this month that gasoline is a very essential commodity – the main input – for many industries. So, under the combined effects of many factors and the spillover effect, a new wave of price increases will come.

The August CPI inched up 0.63 percent over last month, said the General Statistics Office, adding that the CPI rose 5.04 percent over the same period last year, and 10.41 percent in the first eight months of last year on aggregate.

Though local firms said early this month that they had taken a gut blow with last month’s hike of petroleum products and simultaneous spikes in the prices of electricity and cooking gas, their sacrifice must be even greater with the latest price hike.

After all, we all help share the burden. As petroleum products are the main inputs for many industries, as stated above, it will add costs for other enterprises, including utilities firms and cooking gas companies.

The remaining question is, will utilities firms and cooking gas companies raise their prices?