The State Audit of Vietnam has recently proposed to make up for the losses Petrolimex, the country’s largest fuel wholesaler, incurred in 2011, a suggestion that sparked concern among industry insiders, who wonder why the fuel giant is to receive such a big favor.

Petrolimex’s 2011 losses should be offset by profits from its other production and business activities, as well as from the fuel price stabilization fund, according to the SAV.

Petrolimex posted enormous losses of VND2.35 trillion (US$112.98 million) from fuel trading activities in 2011, which the SAV said was mainly caused by the foreign exchange rate difference, and the tightened management of the government over the fuel price adjustment.

“The government asked Petrolimex to keep fuel prices stable in order to combat inflation, stabilize the macro-economy, while input costs and other expenses repeatedly soared,” it said.

The wholesaler, which holds up to 60 percent of the country’s fuel market, however booked a VND841.3 trillion profit from other business activities, namely cooking gas, transporting, insurance, and banking, thus reducing the 2011 total loss to VND1.42 trillion.

The figures were released in a move to explain for its being proposed to have the losses made up for by the SAV.

The state audit also pressed that Petrolimex has had its share in big cities decline, while incurring rising costs in the remote areas, where fuel loss rates and transporting expenses are high.

Big favor?

The director of a fuel wholesaler said he is wondering under which regulation and mechanism Petrolimex is assigned to enjoy such incentive.

“If it is because Petrolimex has taken part in the fuel price stabilization program, all other participants should be treated the same,” he said.

“Why did the SAV only propose to support Petrolimex, how about other wholesalers?”

The director added that although Petrolimex may suffer difficulties in selling at the remote areas, their retail prices there are in fact higher than the normal rates.

Specifically, Petrolimex sells A92 gasoline at the mountainous and distant areas at VND23,790 a liter, while the retail price in other areas is only VND23,330 a liter.

Moreover, the company asserted in a report prior to its IPO in 2011 that it has some 2,100 filling stations at the most prime locations across the localities countrywide.

In September 2008, the government officially announced that it would no longer use the state budget to make up for the losses of the fuel businesses.

“Petrolimex has had its corporate income tax exempted from the fuel losses, now that it is to recoup losses from aid from the state budget, the national treasury will thus lose another big amount of money,” a fuel expert commented.

It is even more unreasonable to use money from the fuel price stabilization fund to make up for Petrolimex, because the fund is contributed by fuel consumers, he added.

“No matter how Petrolimex will have its losses made up, it will create inequality among the fuel trading sector, which is already full of troubles,” he concluded.