Electricity tariffs to rise 7.5% next week

Van Nam and Ngoc Lan

File photo of workers fixing power lines. The Government has approved an average electricity price increase of 7.5% from March 16 - PHOTO: TL

The approval was made at a meeting chaired by Prime Minister Nguyen Tan Dung in Hanoi on March 5, after the ministry and Vietnam Electricity Group (EVN) presented reports on power price adjustments. Accordingly, the average electricity price will be revised up to just over VND1,622/kWh.

The increase is designed to help EVN reduce losses in the past years, ensure gross domestic product (GDP) growth of 6.2%, and achieve inflation of 5% this year.

It is estimated that EVN’s losses would rise to VND12 trillion (US$562 million) in 2015 if the electricity tariffs remain unchanged. EVN is now incurring a loss of VND8 trillion due to the exchange rate volatility in previous years.

The electricity price hike immediately drew strong objection from the business community and economic experts. Many are concerned that the power price rise would pile pressure on local enterprises amid the fragile recovery of the local economy.

Do Duy Thai, general director of Viet Steel Corporation, said that the rise will leave strong impact on steel production. The Government should be deliberate as higher power price will lift up production cost and erode business competitiveness.

If power price hike is inevitable, EVN must design a roadmap and it should be a 5% rise each time only, Thai said.

Tran Tuan Duong, general director of Hoa Phat Group, was not surprised at the hike but said that a higher power price will push up prices of finished projects.

“I’m not either for or against the decision. Power tariff adjustment may not be reflected in products right now but it will be,” Duong said.

According to steel expert Pham Chi Cuong, electricity accounts for 6-7% of steel ingot production cost. A ton of steel ingot now costs around 400 to 500 kWh of electricity.

If electricity price moves up 7.5%, steel companies will see their competitiveness decline, especially when China and Japan are selling lower-priced products on the local market, he said.

Economic expert Pham Chi Lan told the Daily on March 5 that she objected to EVN’s proposal for a 9.5% power price hike last year. The firm’s suggestion was a concern to businesses as they have managed to lower input production costs due to falling oil prices.

“In many years, I’ve observed that the Government always gives approval whenever EVN proposes a power tariff hike. Suggestions by economists are often unheard. As EVN remains the power monopoly, price hikes will pile pressure on other sectors in the coming time,” the expert said.

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