The Vietnamese coal industry must constantly face mounting pressures like difficult mining, slow consumption and falling prices. Particularly, some taxes which come into effect from July 1 will increase production costs and thus significantly impact financial balances of coal companies.
Rising taxes and charges
Currently, the coalmining industry is burdened with a variety of taxes and fees like royalties of 10 per cent, environmental fees and environmental taxes of 2.5 per cent, mining grant of 2 per cent, other taxes and charges of 0.5 per cent. In addition, coal sold in the domestic market is imposed a value added tax of 10 per cent.
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Vinacomin’s revenues and sales were underestimated in the first five months of 2016. Specifically, the group raked in over VND40 trillion of revenue, meeting 37 per cent of the full-year target and 4 per cent lower than the same period of last year. Coal sale reached 14.7 million tonnes, or 40 per cent of the yearly plan year and 7 per cent lower than the same period of 2015.
Major coal users like power plants, cement and fertiliser producers reduced their coal consumption. Remarkably, coal sale to cement producers fell by 500,000 - 1,000,000 tonnes due to rising clinker export and coal import. Vinacomin exported only 125,000 tonnes in the first five months, while it imported up to 630,000 tonnes.
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Mr Nguyen Van Bien, Deputy General Director of the Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin), said that the royalty, also known as natural resource tax, is set to be raised from July 1, 2016. Accordingly, open-pit coalmining and underground coalmining will be added 12 per cent and 10 per cent of taxes, respectively. Total taxes equal to 35 per cent of coal export price. Rates of loyalty, environmental fees and mining rights fees are repeatedly revised up. He stressed that total costs will be raised by VND1,300 - 1,500 billion a year, let alone taxes.
Compared with other countries, royalty rate in Vietnam is very high (Australia is imposing a royalty of 5-7 per cent and China is applying 2-10 per cent and temporarily abolishing other taxes and charges).
Solutions in second half of 2016
Against this backdrop, Vinacomin reported its issues to relevant authorities to find suitable ways to overcome difficulties, Bien said. Besides, Vinacomin will continue to restructure and improve productivity, reduce production costs, accelerate the progress of Nhan Co alumina plant project to bring it into operation soon.
With respect to coal import, Vinacomin imported high-quality coal at reasonable prices from other countries to mix with coal exploited in the western region for two purposes. One is processing and mixing with domestic coal to supply domestic users in order to reduce coal inventories in the western region of Quang Ninh province, ensuring jobs, incomes and social security for coal miners, and utilising and raising the efficiency of domestic coal. Two is buying foreign coal at lower prices because of oversupply to reduce domestic production for future production.
Vinacomin also checked and unified coal product structure, balanced target revenues and profits, and proposed coal production plans to meet demand and reduce inventories.
Huong Ly
Vietnamese
