• Electricity prices to increase 5 percent

Dr. Le Dang Doanh, former head of the Central Institute for Economic Management, turns down the Electricity of Vietnam (EVN)’s assertion that the price hike only has inconsiderable impacts.

Imposing the increase at this time is quite understandable as the consumer price index has just dropped, but it is unreasonable to hike power prices when most businesses are facing difficulties, he says.

“Higher power prices mean firms have to raise their products’ prices, while they have already suffered poor consumption,” says Doanh.

“EVN said the new prices will only cost consumers an additional sum of some tens of thousands of dong, but the problem is prices of other goods will also soar, consequently leading to considerable extra expenses for consumers.”

Meanwhile, Pham Chi Cuong, Chairman of the Vietnam Steel Association, says he has no idea “why EVN chose this time to increase prices.”

“Businesses are struggling to escape the tough spot and the price hike would simply hit them with another burden,” says Cuong.

“Power cost accounts for some 7 percent of the cost of the steel manufacturing sector, so with the new power prices, any business which produces some 40,000 tons of steel a month will incur an overrun expense of VND1.56 billion (US$47,880),” he elaborates.

Similarly, Ho Duc Lam, chairman of the Rang Dong JSC, a plastic manufacturer, said the company will suffer an overrun of VND50 million on its monthly electricity bill.

“With most businesses currently suffering high unsold inventories and poor consumption, the power price hike would simply accelerate their progress to declare bankrupt,” he says.

EVN’s explanations

Power price will go up by 5 percent, or VND65 per kWh, to an average of VND1,369 per kWh, excluding value-added tax starting on July 1.

The surge will yield in an additional sum of VND3.71 trillion (US$178.08 million) in revenues for EVN in the last half of the year, EVN says.

The country’s power monopoly explained prices must be hiked as the prices of coal fueling for power generation and other input costs have all soared.

The added revenues from the increase are expected to deal with the rising coal prices, and part of the losses EVN incurred in the previous years, it says.

“The power price hike in July will not have a huge impact on the public’s life and production,” EVN asserts.

Power price has gone up five times in total since 2009. It started by rising 8.92 percent in 2009 to VND600 – 1,790 a kWh, and 6.8 percent in 2010, to VND600 – 1,890 a kWh. Last year saw two hikes in March (15.3 percent) and December (5 percent), sending the price to VND993 – 2,060 a kWh.