Power price hike needs close curb

Decision 24/2011/QD-TTg, signed on April 15, 2011 by the Prime Minister, allows the power sector to adjust prices in accord with the market mechanism.

Decision 24/2011/QD-TTg, signed on April 15, 2011 by the Prime Minister, allows the power sector to adjust prices in accord with the market mechanism. The price adjustment is in deed the price hike as the price cut will never or seldom occur in the principle that prices are based on the change of input elements.

Like gasoline, electricity is a kind of essential goods for economic activities and the social life. Power price hikes will have certain impact on the country’s economy and the people’s life as well.

Paradoxes

The biggest paradox is that the power sector is currently using many national resources such as land, capital and materials with preferential prices but it is allowed to determine power prices as a sector, even an economic entity. The power sector will therefore deliberately seek reasons for raising power prices rather than trying to find measures to cut power waste and losses to reduce prices.

Earlier, leaders of the power sector requested the Government to raise power prices to the rates of regional countries (except China). Now, they have a golden chance to realize their intention. What does the power sector think when Vietnamese have far lower per capita gross domestic product and personal incomes than those in the region but must pay the same prices for power?

Another paradox is that the Government permits the power sector to determine power prices only five days after submitting a price hike scheme to the Ministry of Industry and Trade. If it proposes a rise of over 5% and has not got the approval, it can still adopt a 5% increase 15 days after submitting the scheme. This is a precedent no other sector has enjoyed when carrying out a decision with large influence on the people’s life. In addition, one may wonder why the Government allowed the power sector to raise prices but imposed no obligations on the output and quality of power supplied to customers.

To the power price adjustment, huge power consumption sectors such as iron, steel and cement will face the risk that their production prices will change continuously for three times a year on average. In theory, it is possible to assume the power sector only raises 5% each time and the power price will double after 14 times of price hike. The power price will double after five years with three times of rise in a year (every four months) or after six years with five times of increase in two years (every 4.8 months). Perhaps, no entity in the world can determine such a big and fast increase in selling prices. And power price hikes will make the Government’s inflation control and prize stabilization policy far from being realized.

Article 4 of Decision No. 24/2011 mentions the publicity and transparency as part of the power price adjustment principles. In fact, this was much referred to by the media and many National Assembly delegates proposed it but it had not been realized. How will publicity and transparency be when the power sector is allowed to determine selling prices by itself? Moreover, Decision 24 also means the Government has offered the power sector an almost permanent priority without a point of stop, including the price and time limits.

Which solutions?

Decision 24 came into being after a process of scrutinization but taking advantage of it is anyway unavoidable. Prices of power, a product that affects the production, trading and life of people across the country, cannot be determined only by the power sector. Any overuse will also result in a price the whole country must pay for.

Therefore, there should be measures for closely controlling the implementation process and a final decision on power prices. The examination on proposed power price adjustments should not be within five days but should be scrutinized for at least 30 days. This will restrict the power sector to disable management agencies by submitting a power price increase plan within the time of public holidays or at the time when there are personnel changes.

It is also inadvisable to assign the Ministry of Industry and Trade and the Ministry of Finance to checking and supervising the application of power prices but there should be the coordination between many ministries and sectors. For instance, the Ministry of Planning and Investment and the Ministry of Agriculture and Rural Development will evaluate impacts of power price hikes on the investment attraction strategy and its influences on the farming of millions of people. The National Assembly Office, the Fatherland Front Committee and the Vietnam Labor Confederation will assess the impacts on the people’s life and millions of workers. On the other hand, the time between power price hikes should be extended to at least six months, instead of three months as it is now. – Vneconomy

Tags: Vietnam electricity, Vietnam electricity prices, Vietnam energy