No basis, contrary to market rules
The Vietnam Chamber of Commerce and Industry (VCCI) has sent a document to the Ministry of Industry and Trade to comment on the draft Decree on fuel trading. In it, VCCI offers many opinions related to the fuel price mechanism, business investment conditions, circulation reserves...
Regarding the issue of distributors buying and selling among themselves, VCCI cites Article 17 of the Draft Regulation on the rights and obligations of fuel distributors, which does not allow distributors to buy and sell fuel among themselves.
According to the Ministry of Industry and Trade's argument, if distributors are allowed to buy and sell fuel among themselves, it will lead to circular trading, through many intermediary levels, pushing fuel prices up.
However, VCCI emphasizes that this argument has no basis and is contrary to market rules.
Parties in the wholesale fuel market tend to prioritize buying from distributors with lower prices. VCCI hypothesizes that if there is a cheap source of goods, but due to being traded through many intermediaries, the selling price increases, buyers will seek the original source to buy cheaper.
Accordingly, any distributor selling at a high price will be eliminated from the market because they cannot compete with other distributors and wholesalers with lower prices.
Previously, Decree 83 and Decree 95 on fuel trading stipulated a 1:1 distribution system, meaning retail traders had to depend on distributors. In that case, if distributors increased selling prices, retail traders could not switch to another supplier and had to bear high prices.
However, Decree 80/2023 on fuel trading has allowed retail traders to import goods from multiple sources. The competitiveness in the wholesale market has increased, so the above situation no longer occurs, VCCI clarified.
Some opinions suggest that allowing distributors to buy and sell fuel among themselves could make the reporting data on fuel reserves inaccurate.
However, according to the draft, the obligation to maintain circulation reserves does not apply to distributors. Therefore, VCCI proposes that the drafting agency amend the direction to allow distributors to buy and sell fuel among themselves.
Need to create fair competition
Mr. Bui Ngoc Bao - Chairman of the Vietnam Petroleum Association affirmed that distributors are an important link in the circulation of goods. They are not intermediaries pushing fuel prices up.
According to him, many distributors are larger in scale than wholesalers, not smaller. Therefore, the type of distributor should not be restricted.
“In a market, where distributors buy and sell is up to them,” Mr. Bao emphasized.
Expressing disagreement with the draft Decree requiring distributors to only buy from wholesalers, Mr. Bao added that wholesalers do not always have sufficient quantities or reasonable prices in every region and at all times.
The Chairman of the Vietnam Petroleum Association suggested that there should be regulations allowing distributors to buy and sell from each other and possibly stipulate the percentage. For example, 50-70% can be freely bought from wholesalers, and the remaining 30% can be bought and sold among themselves. This is a market balancing operation.
“When the market fluctuates unusually, balancing the quantity from distributors with more goods to those with less is necessary. Therefore, the proposal that distributors should not buy from each other needs careful consideration and evaluation,” Mr. Bao commented.
A fuel trading enterprise in the South told Lao Dong that distributors are businesses with the right to free competition, but the draft only allows them to buy from wholesalers and not cross-buy from each other, which does not ensure market competitiveness.
"During periods of price instability, cross-buying allows distributors to share quantities and prices with each other. Limiting this right may not stabilize the market," the business leader said.
He also said that it is necessary to consider and research to draft the Decree in a way that closely follows the actual situation, ensuring the institutional and legal foundation to build a transparent, convenient business environment and fair and equal competition.
