Nghe An: Transport businesses in trouble due to record fuel price increase

The Ministry of Finance - Ministry of Industry and Trade has adjusted the retail price of gasoline. Accordingly, each liter of E5 RON 92 gasoline from 3:00 p.m. on March 1 is priced at VND26,070 (up VND540); RON 95 is VND26,830 (up VND550). This is the 6th consecutive increase in domestic gasoline prices from mid-December 2021 to present. Thus, gasoline prices have approached the threshold of VND27,000 per liter. This increase has pushed gasoline prices to a record high, creating pressure on businesses, especially in the transportation sector.

High operating costs

The sudden increase in oil prices has had a huge impact on businesses in general and the logistics system in particular. In Nghe An, a number of businesses have complained about facing difficulties since the beginning of the year.

Gasoline prices continued to increase in early 2022, reaching nearly VND27,000/liter in early March. Photo: Quang An

Mr. Hoang Khac Truong - Branch Director of Global Logistics Services Company Limited inNghe An, a business providing sea transport services, said that the increase in gasoline prices has put great pressure on the operating costs of the business; the continuous increase in gasoline prices has forced the unit to have a plan to adjust prices. “In the operation of logistics enterprises, gasoline accounts for about 30-40% of the freight rate (depending on the vehicle). A 10,000-ton ship running on the Nghe An - Ho Chi Minh City - Hai Phong - Nghe An route costs about 1.4 billion VND in fuel. If the two-way route is full of goods, it is better, but if one way is full of goods and the other way is less than 80% of the goods, it is certain to lose money. For example, the Nghe An - Saigon route used to cost about 18 million VND/container, but now it has increased to 20 million VND/container. If the logistics freight rate does not increase according to the gasoline price, the business will face heavy losses" - Mr. Truong shared.

In logistics business operations, gasoline accounts for about 30-40% of freight rates. Photo: Thu Huyen

The sharp increase in gasoline prices has also caused many businesses in the construction materials sector to "go bankrupt". Hoa Thuong Company Limited specializes in trading construction materials with the specific characteristics of concrete production, the transportation of cement, sand and gravel consumes a lot of fuel. Gasoline costs account for up to 43% of the cost of concrete, so the increase in gasoline prices has greatly affected the business activities of the enterprise, the cost of products to the construction site has increased by 4-10%.

In the context of rising prices, weak people, and few construction projects, consumption output has decreased sharply. Mr. Nguyen Thu Thuong said: Currently, fresh concrete output has decreased by 60-70%; the unit has nearly 100 trucks but currently only 1/4 of the trucks are operating, many machinery lines are operating at a standstill. Talking about solutions, Mr. Thuong said that it is very difficult because it is impossible to cut costs any further.

Hoa Thuong Company's concrete mixing station is operating at a standstill due to rising fuel costs. Photo: Thu Huyen

For the fieldpassenger transportalso going through the most difficult time in many years, being affected by high fuel costs while the epidemic caused a record drop in the number of passengers.

The leader of Mai Linh Nghe An Company Limited said: Up to now, the number of Mai Linh taxis in operation is only about 100, accounting for 25% of the company's total number of vehicles. The remaining number is currently in the warehouse or given to drivers to take home for storage. The reason why a large number of company vehicles are "parked" is because the price of gasoline is too high, causing operating costs to increase by 20-30%. Meanwhile, the number of passengers has decreased by 80% compared to the time before the epidemic, so the company's revenue in the past time has not met the target, many drivers have quit their jobs because they cannot survive...".

High fuel prices have forced many taxis in Nghe An to stop operating: Photo: Quang An

At Bac Vinh Bus Station, many long-distance buses have been idle since the Lunar New Year. According to statistics, the entire bus station currently has over 100 buses going to different provinces and cities, but only a few dozen are operating regularly. The travel demand of people has decreased sharply, while the high price of fuel has made many long-distance buses not "keen" on picking up passengers at this time.

The owner of HG bus, running the Vinh - Ho Chi Minh City route, said: If before, the oil price was still stable, the cost of fuel for a round trip was about 10 million VND (2,700km), now it has increased to 15 - 16 million VND. Meanwhile, the 40-seat sleeper bus has at most only 10 - 15 passengers at this time, with a ticket price of 800,000 VND/person, the total revenue per trip is only about 20 million VND, so we have to stop running for a while because we do not have enough money to cover the costs...".

Struggling to get by

The continuous increase in fuel prices has put great pressure on the logistics service industry. Many units are forced to cut all costs to adapt and survive. However, no matter what the solution is, increasing fares along with fuel prices at this time is an inevitable choice.

Mr. Ho Quang Hieu - Deputy Director of Mai Linh Nghe An Co., Ltd. said: Currently, the unit is listing the opening price for 5-seat cars at 15,000 VND, the fare will gradually change depending on the distance traveled by the customer. However, with the record high price of gasoline, the unit plans to hold a meeting to propose to the Transport Association to increase the fare. The price is carefully considered to ensure suitability, helping people to conveniently pay for travel expenses as well as ensuring income for drivers. In addition, the unit is also working with banks to propose extending the repayment period for loans in this difficult time...".

Many transport businesses are aiming for solutions to increase fares and ticket prices. Photo: Quang An

Mr. Nguyen Van Dat, a taxi driver in Vinh City, shared: In the past, drivers would often drive around the streets, to crowded places such as hotels, restaurants, bus stations... to wait for customers, but now most drivers look for parking spaces, wait for notifications from the switchboard and passersby because driving around would waste gas money and it would be difficult to find customers...

The fare increase has also been applied by some bus companies. According to a survey by PV, the fares of bus companies on the Nghe An - Ho Chi Minh City route, one of the routes with the longest travel distance, have increased from 100,000 - 150,000 VND/ticket, ranging from 800,000 - 900,000 VND. The owner of HL bus company said: "Increasing the fare is inevitable for the bus company to continue operating, however, we have also considered increasing it at a suitable level because if the increase is too high, customers will choose other means of transport. In addition, increasing the fare also goes hand in hand with improving the quality of service, creating trust and safety for passengers when choosing their vehicle."

Fuel prices have increased, while the number of passengers has decreased due to the pandemic, causing many bus companies to temporarily suspend operations. Photo: Quang An

With the suffering"double difficulty"Due to the complicated developments of petrol prices and the epidemic, businesses in general and transport businesses in particular in the province have been operating on a tight schedule, waiting for petrol prices to drop or not to come up with timely adaptation solutions.

In addition, the units also hope that provincial leaders, all levels and sectors will continue to synchronously implement solutions to implement policies to support loans and reduce taxes, helping businesses gradually overcome difficulties and recover after a long period of being affected by the Covid-19 pandemic.