Vietnam's power price increase to hit business

The Ministry of Industry and Trade announced that the price of electricity would rise to an average 1,508.85 dong (Bt2.24) per kilowatt-hour, exclusive of value-added tax, a surge of 71.85 dong.

The adjustment aimed to offset partly the increased cost of power generation caused by the rise in the prices of coal and gas.

However, the move was a surprise to most people since the last electricity price rise was only in December. Also, the government has always been cautious about raising power prices to curb inflation and stabilise the economy and because many companies suffered from high inventories.

The owner of freezing storehouses in Hanoi’s Hoan Kiem district, Nguyen Thi Hieu, said the cost of electricity made up 30 per cent of her total expenditure.

“From the beginning of this year, costs have increased, but to avoid losing clients, we can’t raise the rent,” she said.

Nguyen Hong Quang, director of Quang Lan Mini Mart supermarket in Long Bien district, said: “We are struggling to balance costs and revenue. More spending on power means less spending on other things.”

Vu Vinh Phu, chairman of the Ha Noi Supermarkets Association, said purchasing power was still weak and the increased electricity price was likely to cause deflation.

Most supermarkets were planning to increase the prices of products while minimising costs, he said, emphasising that it was a tough problem.

The deputy general director of Viet-Uc Steel Company said the power price rise was an extra burden to the industry already buckling under high inventories caused by the economic slowdown and the stagnant housing market.

“The government offered policies to stimulate production and consumption but the increase in power prices could hinder its efforts,” he said.

Vietnam Energy Association president Tran Viet Ngai said the price hike was necessary.

Power prices were about 7 US cents per kilowatt-hour, 3 cents lower than in neighbouring countries, he said, noting that the low prices depressed investors in power projects and Electricity of Vietnam had suffered losses and did not have enough capital to reinvest in production.

“Without reinvestment in the power sector, energy security may be threatened,” he said.

He emphasised, however, that in the long term a suitable road map for the power price hike was needed so that enterprises could adapt properly.

 

Innovations 

At a recent monthly press conference, Government Office Minister Vu Duc Dam said higher power prices were expected to boost technological innovation and energy efficiency in projects in Vietnam.

“Moreover, with a limited state budget, Vietnam is calling on the private sector to join the power industry, but low prices accompanied by low profits have failed to attract investors,” he stressed.

Dam said the government would relieve the burden on the poor and low-income earners. Under the new power price adjustment, poor and low-income households that use zero to 50kWh per month will be charged the same amount – 993 dong – as before but households using 100-400kWh per month will be charged an additional 6,800-37,000 dong per month.

The last electricity price rise was 5 per cent or 68 dong to 1,437 dong per kilowatt-hour, on December 22.