Freight cost reduction in line with oil price decrease

Wednesday, 2016-01-06 17:16:34
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Transportation costs are expected to further decrease with the declining trend of petroleum prices.
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NDO – The retail prices of RON 95 and RON 92 petrol were reduced by VND370 per litre to VND16,730 and VND16,030 as of January 4, while diesel also fell by VND870 per litre to VND11,110.

This is the first decline in the new year, but the 13th since 2015 and the sixth consecutive decrease.

Once again, the public continues to raise legitimate demands to reduce freight rates, and again transport businesses are trying to dodge the sensitive issue.

Transport businesses gave the reason for the delay as the slow decrease of petrol prices. Even if being reduced, there would be a certain latency instead of immediately reducing transport costs. On the other hand, the companies complain that charges for each adjustment are very costly.

For total transport costs, fuel makes up about 30% for petrol and 35-40% for oil. Although there are no accurate statistics, it is estimated that money flowing into the pockets of transport companies is up to tens or hundreds of millions dong each day. This is the main reason for the companies deliberately ignoring the fee reduction, even with  an urging from management agencies.

Freight cost is not included in the price stabilisation programme as a number of specific items. This type of service should be encouraged to increase competitiveness and reduce costs. Thus, it is necessary to enhance the role of State management to prevent transport enterprises collaborating to sway freight costs and delaying charge adjustments. Serious checks are needed for competition and monopolies through the Vietnam Competition Authority and other related agencies.

To protect consumers’ interests, prior to developing a competitive transport market, the immediate need is to have a strong mechanism to push businesses to reduce freight rates when petroleum prices plummet. Freight adjustment appropriate with fuel discounts are a legitimate demand of society, contributing to reducing the price of commodities and services.

Gasoline and oil price decline lays a two-dimensional impact on the economy. According to calculations, oil price falls cause a shortfall in budget revenue and affect GDP growth.

The negative impacts will be neutralised somewhat if there are positive effects from the reduction of input costs, in order to promote production and consumption. But in fact, society still has to bear unreasonable costs, while benefits from the fuel price drop are limited to  a group of people trying to delay reducing transport costs.

To create fairness, severe sanctions should be handed out to  shipping companies refusing to adjust freight prices, hindering the development of the economy and affecting consumers’ interests.