Circular No. 26/2009/TT-BTC guiding the settlement of losses from trading oil products in 2008

CIRCULAR

Guidelines for finalizing the loss subsidy for oil products business in 2008

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Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Implementing the Prime Minister's directive in Circular No. 3647/VPCP-KHTT dated July 1, 2005 on the mechanism for subsidizing losses in oil product sales; Announcement No. 240/TB-VPCP dated November 16, 2007 announcing the Prime Minister's conclusion on gasoline and oil price management in the last two months of 2007 and in 2008; Announcement No. 82/TB-VPCP dated March 25, 2008 of the Government Office on the plan to ensure supply of gasoline and oil in 2008; Announcement No. 171/TB-VPCP dated July 18, 2008 announcing the Prime Minister's conclusion on the adjustment plan for gasoline and oil prices in the second half of 2008 and amendments to some provisions of Decision No. 289/QĐ-TTg dated March 18, 2008 of the Prime Minister; Announcement No. 253/TB-VPCP dated September 15, 2008 announcing Deputy Prime Minister Nguyen Sinh Hung's conclusion on managing oil sales operations in the near future;

To facilitate state-owned enterprises engaged in oil trading to transition to market-based operations, the Ministry of Finance provides guidelines for finalizing the loss subsidy for oil products business in 2008 as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of application:

Enterprises that import gasoline and oil according to the targets assigned by the Ministry of Industry and Trade in 2008, sell imported oil products (diesel, gasoline, mazut) at the state-regulated price and incur losses in their business operations with these oil products.

2. Scope and time period for applying the loss subsidy policy:

- Losses from selling mazut and gasoline occurring from January 1, 2008 to July 21, 2008.

- Losses from selling diesel occurring from January 1, 2008 to September 16, 2008 and inventory losses of imported diesel at the end of September 16, 2008 (including diesel in transit owned by the enterprise).

- Excluding sales of domestically produced and processed oil products and temporarily imported goods for re-export.

II. SPECIFIC PROVISIONS

1. Determination of the loss subsidy amount:

1.1 For losses incurred from selling oil products (gasoline, mazut, diesel) during the period the loss subsidy policy applies:

The loss subsidy amount for each enterprise is determined as follows:

 

- Inventory value at the beginning of the period 2008: based on the inventory value at the end of the reporting period in the 2007 financial statement of the enterprise which has been audited.

- Import value (CIF) up to the date of transitioning to market pricing is based on:

+ Actual CIF import price as recorded on customs declaration forms that have been inspected and cleared by customs.

• For gasoline and mazut: applicable to shipments imported from January 1, 2008 to July 21, 2008.

• For diesel: applicable to shipments imported from January 1, 2008 to September 16, 2008.

+ Exchange rate at the time of import (recorded on the customs declaration form).

+ Import tax included in the cost: 0% applied throughout the subsidy period.

- Quantity: corresponding to the inventory value at the beginning of the period and imports during the period mentioned above (based on stocktaking reports at the start of 2008 and actual import quantities as reported on customs declarations).

* Value-added tax (from import to retail) and fees paid to the state budget:

- Diesel fuel fee rate: 300 VND/liter

* Operating cost rate from port Vietnam to retail:

- Gasoline and diesel: 500 VND/liter (cost from port to retail)

- Mazut: 300 VND/kg (wholesale cost)

* Average regulated selling price per unit: determined based on actual consumption corresponding to the regulated selling price for each period as follows:

- For gasoline:

+ From January 1, 2008 to before 11:00 on February 25, 2008 is 10,200 VND/liter (Decision No. 95/2007/QĐ-BTC dated November 22, 2007 on gasoline and oil prices).

+ From 11:00 on February 25, 2008 to before 10:00 on July 21, 2008 is 13,900 VND/liter (Decision No. 12/2008/QĐ-BTC dated February 25, 2008 on gasoline and oil prices).

- For mazut:

+ From January 1, 2008 to before 11:00 on February 25, 2008 is 8,500 VND/kg (Decision No. 95/2007/QĐ-BTC dated November 22, 2007 on gasoline and oil prices).

+ From 11:00 on February 25, 2008 to before 10:00 on July 21, 2008 is 9,500 VND/kg (Decision No. 12/2008/QĐ-BTC dated February 25, 2008 on gasoline and oil prices).

- For diesel:

+ From January 1, 2008 to before 11:00 on February 25, 2008 is 10,200 VND/liter for 0.25% sulfur diesel; 10,250 VND/liter for 0.05% sulfur diesel (Decision No. 95/2007/QĐ-BTC dated November 22, 2007 on gasoline and oil prices).

+ From 11:00 on February 25, 2008 to before 10:00 on July 21, 2008 is 13,900 VND/liter for 0.25% sulfur diesel; 13,950 VND/liter for 0.05% sulfur diesel (Decision No. 12/2008/QĐ-BTC dated February 25, 2008 on gasoline and oil prices).

+ From 10:00 on July 21, 2008 to before 11:00 on September 16, 2008 is 15,900 VND/liter for 0.25% sulfur diesel; 15,950 VND/liter for 0.05% sulfur diesel (Decision No. 57/2008/QĐ-BTC dated July 21, 2008 on gasoline and oil prices).

+ From 11:00 on September 16, 2008 is 15,450 VND/liter for 0.25% sulfur diesel; 15,500 VND/liter for 0.05% sulfur diesel (Decision No. 78/2008/QĐ-BTC dated September 16, 2008 on reducing diesel prices and managing gasoline and oil sales operations).

1.2 For inventory losses of diesel at the end of September 16, 2008:

* Quantity of diesel inventory: is the actual quantity on hand as reported in the physical inventory at the time of implementing Decision No. 78/2008/QD-BTC dated September 16, 2008 (consistent with the balance of imports, exports, and inventory for the period).

* Cost price of diesel inventory: is the actual weighted average cost price of imported diesel transferred accordingly in accordance with the calculation method specified in Point 1.1.

* Cost price CIF (VND) converted from retail prices according to Decision No. 78/2008/QD-BTC dated September 16, 2008 of the Minister of Finance regarding reductions in diesel retail prices and management mechanisms for gasoline and diesel: Diesel 0.25S is 13,250 VND/liter; Diesel 0.05S is 13,300 VND/liter.

2. Settlement of loss subsidy:

2.1 Total loss subsidy amount for fuel oil or mazut:

2.2 Total loss subsidy amount for diesel:

* Exchange rate difference: is the difference between the actual exchange rate paid to the bank and the accounting exchange rate for imported goods.

The exchange rate difference amount allocated to each type of oil: is determined based on the total exchange rate difference amount arising from the operation of gasoline and diesel during the period (offsetting increases and decreases), allocated to each type of gasoline and diesel consumed based on production volume.

3. Procedure for settlement of loss subsidy:

3.1 Based on the financial report for the first nine months of 2008, the amount of state budget temporarily advanced for loss subsidy, the enterprise engaged in wholesale gasoline and diesel business shall prepare a loss subsidy settlement report for each type of oil according to the guidance provided above.

3.2 Based on the request letter and the loss subsidy settlement report of the enterprise engaged in wholesale gasoline and diesel business, the Ministry of Finance will verify and officially determine the loss subsidy amount for each type of oil according to this Circular.

3.3 Based on the verified loss subsidy settlement reports for each type of oil, the Ministry of Finance will implement the payment of the remaining loss subsidy amount. In cases where the temporarily advanced loss subsidy amount exceeds the settled loss subsidy amount, the enterprise engaged in wholesale gasoline and diesel business shall promptly repay the state budget.

3.4 If the overall business results of gasoline and diesel in the fourth quarter of 2008 show a loss due to continued consumption of diesel inventory as of September 16, 2008 at subsequent stages when prices have decreased (approved by the Ministry of Industry and Trade and the Ministry of Finance), the enterprise shall report to the Ministry of Finance and the Ministry of Industry and Trade for specific consideration.

III. IMPLEMENTATION

This Circular shall take effect forty-five days from the date of signature.

All previous guiding documents for loss subsidies for various types of oil that conflict with this Circular are hereby abolished.

During implementation, if there are any difficulties, enterprises are advised to report to the Ministry of Finance for timely resolution./.