August 16, 2011

Fuel price fluctuations targeted


AN outcry over soaring fuel costs has brought renewed attention to a decade-old Ministry of Commerce prakas that requires price changes to be announced one day in advance.

The ministry has re-circulated the prakas, which officials say ought to keep petrol prices more stable.

“The measurement is to force those companies to comply with the existing edict to prevent price fluctuation and ensure the inventory,” said So Darith, deputy director of the Commerce Ministry’s Trade Promotion Department.

“Normally, whenever they want to increase or decrease the price, they have to inform the ministry,” he said, adding companies had reaped unfair benefits by not complying with the law.

The prakas forces oil and gas import-export companies to both inform the ministry one day prior to any price change and to regularly report their inventories, he said. Despite being passed in 2000, companies have generally not complied with the regulation.

About 1,500 people in Phnom Penh protested the rising cost of petroleum in the city late last month. Petroleum prices yesterday were about 9 percent higher than in January 2011, according to Commerce Ministry daily statistics.

The Ministry of Economy and Finance predicts overall price inflation will hit 5.5 percent this year, while the International Monetary Fund predicts average inflation of 6.5 percent this year. Experts say the increase in fuel prices is playing a large role in Cambodia’s inflation.

Companies are now required to inform the ministry’s Trade Promotion Department of any price change in writing, as well as post prices on gas station billboards in Cambodian riel. The postings must be visible from 200 metres away, the prakas said. Also, firms must report in writing to the department their inventories each month, according to officials. The ministry will require import-export companies to hold in supply an amount equal to that they sell each month.

May Mailia, Phnom Penh-based marketing manager of energy company PTT, confirmed that he had received the directive last week.

“We welcome any recommendation and directive from the government to maintain social and public safety. It will not affect our business in any way,” he said.

In response to the ministry’s inventory rules, he said companies typically keep the same amount of fuel they sell each month in reserve to allow for supply security.

Cambodian Economic Association President Chan Sophal expressed disappointment with the measure, saying that while it may benefit consumers, it also hurts those import-export companies.

“It’s good for consumers because it does not allow the companies to capitalise on rising global prices. But that prevents sellers from having full flexibility when setting their prices,” he said.

“The price should be dependent on free competition among industrial players. That competition should help to lower prices, not government intervention,” he added.

Cambodia imported 756,139 tonnes of petroleum worth US$692 million in the first half of the year, compared with 440,607 tonnes worth $296 million in the same period 2010, ministry statistics show.

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