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Oil and petrol prices decreasing, transport fees rising   2008-09-08 - Lao dong

Two weeks have passed since the petrol price was slashed by VND2,000/litre. Meanwhile, transport companies are still trying to delay cutting transport fees.


Only taxi firms have announced reducing fees by VND500/km. Hoang Long and Future Star were the first taxi firms that announced the fee reduction in late August. On September 3, Mai Linh taxi also announced 5-7% decreases in taxi fares. Vinasun followed the move when it announced on September 6 it was reducing fares from VND11,500/km to VND11,000/km. Meanwhile, other taxi firms have not made any statement related to fare decreases.


In Da Nang city, nearly all taxi firms have slashed taxi fees by 5% on average as they have to do that. However, analysts have pointed out that fares have decreased by VND500/km only, much lower than the increase of VND1,000/km taxi firms implemented before.


Chairman of Da Nang Taxi Association Tran Phi Hung said that they have been forced to reduce fees while they really do not want to. With the current oil and petrol prices, taxi firms are still incurring losses. “The fee reduction is unwilling,” he said.


Transport fees will keep rising?


On September 7 in the morning, Nguyen Cong Bang, Head of the Planning and Investment Division under the Hanoi Coach Station Management Company, said that the company had not received any notices about transport fee adjustments from transport firms.


Bang said that 2/3 of transport firms announced fee increases of 10-15% in August after the petrol price was raised to VND19,000/litre. Meanwhile, none of them have announced any plans to reduce prices.


Bang added that firms did not raise the transport fee right after the petrol price was raised, and they would not hurry to lower the transport fee right after the petrol price decreased.


Nguyen Huu Thua, Director of Mien Dong Coach Station in HCM City, said that the government did not slash oil prices, while the coaches here mainly run with oil. That explains why transport firms have not considered reducing transport fees.


Not only passenger transport firms, cargo transport firms also say that a transport fee reduction cannot be implemented now. In fact, some firms have decided to cut the transport fee for every carriage by VND20-100,000. However, the move has been explained as an act to raise their competitiveness rather than because of the petrol price decrease.


Chairman of the Da Nang Transport Association Dinh Van Ba said that most passenger vehicles run on diesel, therefore, the petrol price decreases are irrelevant. Ba said that transport firms cannot cut fees further. In fact, they are planning to ask for permission to raise fees by 8-10% in the time to come.


However, Ba said that the plan to raise transport fees will still need to be approved by the city’s Finance Department, the city’s taxation agency and transport department to become realistic.


As such, to date, except some taxi firms, which announced 5% cuts in fares, and air carriers, which cut fuel surcharges by 16% on domestic flights, other transport firms have not made any move.


Will petrol price decrease further?


The world’s oil price continues its downturn with the price now staying at below $107/barrel.


On September 7, the oil price was reportedly at $106/barrel. Jonathan Kornafel, Director of Hudson Energy Fund, said that the oil price may fall down to $105/barrel and then to $80/barrel in 6-8 months.


The Ministries of Finance and Industry and Trade on September 7 said that the ministries are considering many scenarios. If the world’s oil price continues decreasing, the ministries will raise the import tax rate from 0% to 5% on petrol.


Deputy Minister of Industry and Trade Do Huu Hao believes in the bright scenario that the oil price will stay below $100/barrel.

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