Controversy over lowering gas business conditions

Despite concerns that strict business conditions could squeeze small businesses out of the market, many distributors still believe that maintaining high standards is necessary in a business that requires systematic business practices like the gas business.

» Ministry of Industry and Trade will amend gas business conditions

The previous regulation on the conditions for trading in liquefied petroleum gas (gas) was Decree 107/2009, which required distributors to have at least 300,000 cylinders and a warehouse of 800 m3. Decree 19/2015 reduced the criteria to 100,000 cylinders and 300 m3, respectively. This is also a point of controversy, as many small businesses are still worried about bankruptcy due to the conditions being too much for them, while the big guys support it "to avoid market disruption".

Mr. Nguyen The Nhan - Director of Hoang An Company (Tay Ninh) said,Compared to the previous standards in Decree 107, the conditions to become a gas distributor in Decree 19 have lowered the standards quite a bit.standards should not be lowered any further. According to this person, the legal framework cannot satisfy all businesses. "Could it be that the current regulations have lowered the standards compared to before, and now because businesses say it is difficult to implement, the standards will have to be lowered again?", Mr. Nhan raised the issue and emphasized that this is an opportunity to force businesses to do business more systematically and properly, and not to do it haphazardly and sloppily like before.

Many gas businesses believe that although Decree 19 has many strict regulations, it is not to the point of eliminating small businesses from the market.

The Director said that this was a summary of his own experience. When he first started his business, his company "joined hands" to illegally decant gas to make a profit. "After a while, I realized that if we only do business this way, doing bad things forever, it would be difficult for the business to survive. Faced with the choice of either rising up, changing to develop or "living a miserable life" forever decanting gas illegally, we were forced to innovate to survive," the Director shared. He also frankly said that if we decided to do gas business, we could not do it haphazardly.

According to Mr. Hoang Anh - Director of Petrolimex Gas Company, this is a conditional business item, requiring large investment, methodical and systematic business. Therefore, the regulations on cylinders and storage as in Decree 19 are appropriate and should be maintained to better ensure consumer rights, and distributors must also improve their responsibility in business.

Regarding the regulation that filling stations must be owned by a distributor as stipulated in Decree 19, Mr. Hoang Anh thinks it is reasonable to control the rate of fake gas in the market. Statistics from the Vietnam Gas Association show that illegal filling accounts for 18-25% of the total gas consumed in the market. If in 2015, about 1.3 million tons were consumed, a quarter of it was illegal gas from illegal filling and filling stations. The state loses revenue, businesses suffer, but more dangerously, people have to pay to use substandard products.

“The Decree does not make it difficult for small businesses, but the regulations here are clearer and more stringent. If any business does not meet the requirements of being a wholesaler, it can be a general agent, an agent… Even compared to countries in the region such as Thailand, Singapore… our regulations are more open,” commented Mr. Hoang Anh.

Mr. Nguyen The Nhan also disagrees with the view that tightening regulations on gas business activities is "eliminating small businesses from the market".“Actually, no one forbids you from making gas, it depends on your ability. You can’t just let businesses complain and then the management agency has to follow suit and lower standards, and if you make concessions, the market will be disrupted,” he said.

In a document sent to the Ministry of Industry and Trade, the Vietnam Gas Association proposed not to lower the standards on business eligibility for gas wholesale and distribution enterprises, and to maintain the same as the regulations in Decree 107/2009. Maintaining the standards will build enterprises with sufficient potential to suit Vietnam's integration trend. In addition, regulations on gas cylinder management between wholesale enterprises and agents will create a legal basis for handling violations as well as responsibilities related to gas cylinder explosions.

However, gas businesses also said that some regulations in the document still cause difficulties for businesses. According to Mr. Hoang Anh, Decree 19 currently stipulates that an agent can only sign with one general agent or three traders, which has somewhat limited the freedom of business of businesses. "We should liberalize trade, not control the business partners of businesses," he said.

The Director of Hoang An Company suggested that this regulation should be expanded to businesses that have been recognized as distributors, and will be allowed to sign contracts with 2-3 other traders to conduct parallel business, diversify products, and consumers also have the right to choose reputable gas brands to use.

In response to conflicting opinions on Decree 19, Deputy Minister of Industry and Trade Tran Quoc Khanh said that a month ago, the Minister had directed his subordinate units to quickly create favorable conditions for gas trading enterprises and these units are in the process of amending it.

“We hope that businesses that do not meet the requirements of Decree 19 will remain in the LPG business chain, not intending to eliminate small and medium-sized enterprises from the industry,” the Deputy Minister affirmed.

According to VNE