The Ministry of Industry and Trade has sought feedback from ministries, agencies, businesses and industry associations on a revised draft decree governing the fuel trade, circulated with Submission No. 8153 dated October 8.

The latest draft retains a proposal allowing major fuel suppliers and independent distributors to determine their own wholesale and retail prices under market mechanisms and in accordance with pricing laws.

In areas far from ports, major storage depots or fuel production facilities, major suppliers would be allowed to identify the locations concerned and set local selling prices if their reasonable, valid and audited costs from the preceding year exceeded the standard business cost allowance.

However, those prices could be no more than 2% above the supplier’s own published retail prices at the same time. For heavy fuel oil, the limit would be calculated against its wholesale price.

Independent distributors operating in these areas would also be allowed to set prices. Their retail and wholesale prices, including those for heavy fuel oil, could not exceed the highest prices announced by major suppliers in the same area at the same time.

After adjusting prices, fuel businesses would be required to submit price declarations and connect their data systems with state regulators.

A significant addition to the latest draft is a set of pricing formulas for major suppliers and independent distributors.

Pricing formula for major suppliers

For major suppliers, the selling price would comprise the fuel purchase price, sourcing costs, a standard business cost allowance, profit and taxes.

Businesses would determine purchase prices and sourcing costs for imported and domestically purchased fuel, as well as profit, based on their actual operations. Taxes would be applied in accordance with the law.

The initial standard business cost allowances would follow levels published by the Ministry of Industry and Trade for the gasoline, diesel and heavy fuel oil grades most widely consumed in the market. These allowances would include costs allocated to distributors within each supplier’s network.

By January 31 each year, the ministry would announce revised allowances based on changes in the previous year’s average consumer price index, or CPI. If CPI figures were not yet available, existing allowances would remain in force until an adjustment was announced.

Major suppliers would have to report their actual business costs annually and explain any differences from the standard allowance. They would also submit independently audited cost reports every three years for review.

If actual costs fluctuated unusually or the cost structure changed substantially enough to affect fuel prices, supply and energy security, the ministry would work with the Ministry of Finance to assess the situation and submit a proposed adjustment to the prime minister for consideration.

Different rules for affiliated and independent distributors

For distributors operating within a major supplier’s network, the draft would allow them to set their own retail prices, provided these did not exceed the supplier’s published prices.

Distributors could charge less than their supplier. They would be responsible for their chosen prices and would have to announce, display and declare them.

Whenever a major supplier changed its prices, distributors would have to ensure their own prices stayed within the revised ceiling from the moment it took effect. An increase by the supplier would not oblige distributors to raise their prices accordingly.

Major suppliers would be required to notify distributors fully of the applicable prices, geographical coverage and effective time.

Independent distributors, meanwhile, would calculate retail prices using their actual purchase costs, reasonable circulation and distribution costs, a profit amount they determined themselves, and applicable taxes and fees.

Actual purchase costs would be calculated after deducting discounts, price reductions and other downward adjustments.

All pricing components would have to use consistent units, calculation methods and cost definitions. Costs, taxes and fees already included in the purchase price could not be counted again.

Independent distributors would determine their own prices and bear responsibility for those decisions.

The ministry has also proposed provisions for independent distributors purchasing fuel from multiple sources.

These businesses would set retail prices, or wholesale prices for heavy fuel oil, based on actual purchase costs, reasonable circulation and distribution costs, profit, and statutory taxes and fees.

Whenever they adjusted prices, they would have to identify how each component had changed since the previous adjustment.

Businesses could set prices suited to their operating conditions and the market, while meeting requirements to announce, display and declare prices and comply with any applicable limits.

Advance notice and monitoring for collusion

During any period when price stabilization measures were in force, all fuel businesses would have to comply with prices or price limits imposed by the competent authorities.

The draft also sets out requirements for price adjustments, announcements and declarations.

Businesses would have to announce new prices at least 30 minutes before they took effect and clearly specify the effective time. They could neither implement an increase ahead of that time nor delay a reduction.

Price declarations would have to be completed by the end of the following working day. Filing a declaration would not constitute a price approval procedure.

The Ministry of Industry and Trade and People’s Committees would use the declared data to monitor pricing behavior and market allocation, seeking to prevent covert agreements and cartels.

The data would also help regulators identify signs that could trigger investigations into restrictions on competition.

Tam An