Finance Minister Vuong Dinh Hue has asserted that Vietnam will regulate the prices of electricity, coal and petroleum in accordance with market fluctuations beginning in 2013. This means that electricity prices may be hiked to offset costs. Not only effecting electricity, a similar move will also be applied to petroleum and coal. “We cannot subsidise everything and cross-compensate like now.”
Remarking on this issue, Mr Nguyen Tien Thoa, Director of Price Management Department under the Ministry of Finance, said the Government will continue with the market-driven pricing roadmap to regulate prices of State-controlled commodities like electricity, coal and petroleum to encourage investment and economical and efficient use. However, Vietnam needs to select the appropriate time to avoid domino effects and psychological effects that may affect prices of other goods and services.
He noted that, in 2012, the Government continued basing on market factors to regulate prices of some staple goods and services to end price subsidies. However, a full market approach is excluded next year because Vietnam favoured the gradual ending of subsidies. It is very important to find the best time and degree of price changes to control inflation, stabilise macro economy and ensure social security. As a matter of fact, these changes will certainly impact the consumer price index.
He added that together with price regulation, Vietnam must resolutely enforce Resolution 01/2012 of the Government to ensure the balanced supply and demand of goods and services, tighten fiscal and monetary policies, and narrow the trade deficit to promote price competition and prevent pricing transfer. In general, price changes will be calculated to hold 2012 CPI to a single-digit rate.
Referring to a coal price hike proposed by the Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin), Mr Nguyen Tien Thoa said coal prices currently sold to power generators are equal to only 57 percent - 63 percent of market rates in 2010. This is not a market principle. Hence, it is necessary to raise them, but the degree must be carefully considered to avoid a surge in electricity prices. If coal prices are raised to 72 - 80 percent of market rates in 2010, power rates will rise 26 percent. This will add VND18.66 to a kWh of electricity produced.
Currently, electricity and petroleum prices are governed by State-regulated market mechanisms.
“Vietnam is applying the market price mechanism. The rise and fall in prices depends on objective market signals, especially those driven by global market prices. We cannot fix it or force it to stand still. We must accept a reasonable price hike,” he said.
Thoa said authorities will intensify supervision to bring pricing transfer to an end.
To stabilise prices and avoid sudden changes, Vietnam has to apply comprehensive, consistent solutions like balancing supply and demand of goods, and tightening fiscal and monetary policies. In price management mechanisms, price competition needs to be given priority while price monopoly and subsidy must end.
Huong Ly
Vietnamese
