The Electricity of Vietnam Group (EVN) has recently sent a request to the Ministry of Industry and Trade with the intention of raising electricity prices by 10 percent to 13 percent. According to economists, if the new electricity price plan is adopted and applied from November, the economy will face more pressure because electricity is always a primary source of energy for production and business activities in many economic sectors.
Earlier in 2011, to prepare for power price increase as set in the power pricing roadmap, the Ministry of Industry and Trade based on the report submitted by the EVN to send three price options to the Government for final approval. The final hike was 15.8 percent, not the three options of 26.3 percent, 18 percent and 30.3 percent. However, after the EVN repeatedly mourned for losses, the electricity price may be revised up in 2011.
The EVN explained that its operations will suffer serious losses if power price is not hiked - its regular excuse. According to its statistics, it is incurring a loss of some VND3,000 billion because of high power prices paid for independent power plants, higher exchange rates, and investments in risk-taking business like securities, bank, and real estate. Even, the EVN failed to pay debts to other State-owned economic groups like the Vietnam National Oil and Gas Group (PetroVietnam) and the Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin). Giving explanations for the loss, Mr Dao Van Hung, Chairman of the Board of Members, attributed partially to losses accumulated from previous years, particularly in 2010 when the EVN had to pay higher oil prices for lower selling prices: Spending VND3,000 - VND5,000 for a kWh of electricity but selling at just VND1,242 per kWh. Thus, the accrued loss from loss-making electricity trading amounted o VND8,000 billion (US$400 million). According to the EVN, such loss will have to be translated into power costs. Besides, according to the Ministry of Finance, if the EVN based on the balance of revenues and expenditures to define the selling price, the hike in March should have been 62 percent, not 15 percent as adjusted the Government. Another reason is the EVN had to pay high prices for electricity sources when Nam Con Son and PM3 gas supply pipelines are suspended for regular maintenance.
Before the new request from EVN, the Ministry of Finance - the price-managing agency- said price hike is a very sensitive matter at this point of time and prudential steps are thus necessary. An improper movement may undermine efforts of curbing inflation.
Economist Pham Chi Lan blamed loss-making power production on persistent weak State management, slow price change, and monopoly. If monopoly was removed and energy was supplied on competitive principle, the situation would be better, she said.
Many economists also pointed out that if the EVN’s request for higher power prices is approved, the Government’s efforts to stave off spiralling inflation will be undermined. However, in a remark on this issue, Deputy Prime Minister Vu Van Ninh said there is no contradiction of electricity price hike and inflation target. In the long term, this is a feasible policy but the matter is when to do it to produce best results.
The matter is how to align price policies in order to attract investment capital for power production because the electricity industry is now lack of both electricity and capital. However, the Government never agrees with the EVN’s price hike in consideration of its business losses in other non-core business operations, Mr. Ninh added.
Mr Tran Dinh Long, Vice Chairman of the Vietnam Electric Power Association, said: The EVN is experiencing financial disadvantage in the context of economic recession; thus, short-term solutions are also taken into consideration. Nonetheless, in the long run, Vietnam should also open the power market for all economic sectors to boost up healthy competition.
Anh Phuong
Vietnamese
