Power Price Hike To Have Little Impact
Specialists from the Ministry of Finance and Ministry of Industry and Trade have commented that the approved plan to increase the price of power in 2010 will have little impact on social and economic life. This is primarily because the impact on GDP will be minimal, accounting for roughly 0.30 percent of the annual expectation, slowing 2010 growth by a mere 0.34 percent and raising the CPI by only 0.2-0.27 percent.
The Ministry of Industry and Trade commented that as of March 1, the average cost of electricity stood at VND1,058/KWh, up 6.8 percent against 2009. The idea to raise the price of electricity was to help bring it in-line with market demand and increase it commensurate with rising prices of other input materials. The change is aimed at not having a major impact on production and business as well as macroeconomic stabilization targets, promoting power consumption among people and businesses, encouraging businesses to invest in power-saving innovations, support for the poor, and bring the cost of power in-line with market demand.
Accordingly, the 2010 power price chart followed the principle of gradually balancing the price of power for production while still allowing people to maintain their current standard of living. On average, the price of power in the manufacturing sector has increased 6.3 percent (below average); the average retail price of power has gone up 6.8 percent; and the cost for administrative and non-productive state units has increased 6.1 percent. Businesses have seen an increase of 6.3 percent.
The retail power price chart continues to be supportive of needy and low-income people as well as state employees with low consumption requirements. Accordingly, the price of power has remain unchanged for the first 50kWh at VND600/kWh; thereafter, from 51kWh to 100kWh, the price is commensurate with that of average production cost, and from 100kWh upward, the price will increase to ensure an average increase of 6.8 percent (retail consumption price). Regarding the price of power in areas not linked to the national power grid, provincial people’s committees are responsible for deciding the best price to ensure profitable businesses and other factors to make sure expenses are covered.
To stimulate power conservation and cope with the current shortage of power during peak hours, the Ministry of Industry and Trade said that it has also taken this into account, and the new price structure is aimed at effectively serving production. Accordingly, the price of power during peak hours of the morning will see smaller price increases than at other times of the day (specifically 2-4 percent more depending on voltage level). Also, efforts have been made to study and solve issues regarding the price of power in rural (poor) areas, living blocks/residential quarters, industrial parks with available power sources, or the price of power applicable to tenants.
In the eye of functional departments, power price hikes in 2010 (6.8 percent more than 2009) will have a certain impact on the life of people and society, but not in a major or overly adverse way.
In terms of manufacturing, with an average increase of 6.3 percent, companies are looking at a realistic increase of around VND2,630 trillion over the course of the year. Moreover, several key industries will see far softer increases. This will make the price hikes on the manufacturing sector relatively minimal overall.
For individuals, the retail price jump (6.8 percent) will increase people’s expenditures by around 0.19-0.27 percent. 2009 statistics show that in areas where power companies sell direct to people, households using less than 50kWh/month represent 23.8 percent of the total, and that ratio jumps to half in rural and remote areas where power is sold via a retail trading business. Therefore, these people will not see any price hikes at all. For households using 100kWh/month or more, there is a very minimal change to the tune of between VND7,000 and VND36,000 per month. Therefore various relevant ministries seem to be correctly asserting a nearly non-noticeable impact on people, even those who use considerably more power.
For essential goods such as food, garments, and fuel, the Ministry of Industry and Trade said that as the cost of power only accounts for a minimal proportion of production cost, the increase in the price of power will only have a slight increase on that of production. However, the reality is that trade businesses often take advantage of power price hikes to increase the price of their products. Therefore, it is important that there is effective oversight to ensure minimal adverse impacts on other industries and competitiveness that may occur due to exploitation of the hype resulting from increasing power prices./.
Source: VEN
Tags: Vietnam electricity, Vietnam electricity price, Vietnam energy, Vietnam power price
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