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Gas decree fails to control prices   2010-03-08 - VietNamNet/VNS

The decree regulating trade in cooking gas (LPG) has been in effect for about two months, but it has so far proved ineffective in stabilising retail prices.

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Gas prices on the domestic market remain high despite a global price decrease. A worker at the Northern Gas Joint Stock Company pumps gas.

Several LPG companies have attributed the recent price hikes to the higher exchange rate of the dollar, but critics say this should be more than offset by the drop in world prices.

LPG prices on the world market this month fell by US$12.5 per tonne over last month to $722 a tonne.

If local prices are based on world prices, retail gas prices on the domestic market must go down by at least VND4,000 per 12kg cylinder, experts estimate.

But several gas companies this month have actually increased prices by VND2,000-10,000, to VND275,000-VND285,000 for a 12kg cyclinder.

Nguoi Lao Dong (The Labourer) newspaper has quoted analysts as saying only companies that buy from the two domestic gas production plants of Dinh Co and Dung Quat are affected by the higher exchange rate because the two plants calculate sale prices in dollars while buyers have to pay in Vietnamese dong based on the interbank exchange rate.

Last year, companies buying from local gas producers enjoyed a great advantage over gas importers due to the lower interbank exchange rate, but they didn't cut gas prices.

But when the exchange rate increased, they immediately adjusted their prices. This is unfair to consumers, the analysts say.

According to the decree, distributors are required to maintain a stock of least 300,000 cylinders for at least seven days to help prevent market volatility, causing difficulties for small gas trading companies since they are unable to build such reserves.

The analysts told Nguoi Lao Dong that they suspected large gas trading companies were "joining hands" to push up prices.

In addition, the decree also bans agents from selling more than three brands of gas, which offers less choice to consumers.

Nguyen Quang Trung, general director of the MT Gas Joint Stock Company, says his company sells a 12kg cylinder to agents at VND240,000, but agents sell it to consumers at VND265,000, getting a profit of VND25,000 per cylinder.

Retailers can earn profits of up to VND40,00-VND50,000 per cylinder for some gas brands, according to Tran Trung Nhat, director of Thai Duong Company.

Gas trading companies have said they know retailers are earning high profits, but they are yet to find a proper solution.

Till then, consumers get the short end of the stick.

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