Price-gouging snowballs

Price gouging of essential commodities is pushing up costs of other products and services alarming businesses and consumers alike.

Just one example is the increases in retail gas prices which have already risen by VND3,000 to VND4,000 per 12kg canister since Monday, according to Director of Dai Viet Energy Joint Stock Company Nguyen Phuc Dai. But on the world market, gas prices have fallen by US$12.5 since February.

The Growing Retail Market
Price rises would cause a surge in the consumer price index by 0.4%.

The increase in gas prices coincides with retail electricity rate hikes of 6.8 per cent from the previous rate of VND970.9 per kilowatt effective as of March 1.

Steel and cement, which have electrical-intensive production processes, have been hit hard by the hike. Electricity fees accounted for 10 per cent of steel firms’ production cost, said Pham Chi Cuong from the Viet Nam Steel Association. The increases meant that firms would on average have to pay between VND12 billion and VND15 billion more for electricity fees (per month), Cuong said.

Deputy Minister of Industry and Trade Do Huu Hao said rate hike was a necessary step in the road map towards deregulating the energy industry and allowing the market to set rates.

He defended the rise on the grounds that prices of coal, oil and gas – key inputs in power generation – had also increased in recent months.

Steel companies have passed on the price increases by raising the steel price by VND200,000 per tonne, thus bringing the price before tax of finished product to VND12.2 million.

Nguyen Van Diep from the Viet Nam Cement Association Secretariat said the rise in electricity prices by 6.8 per cent would likely cause the cost of cement production to increase by 3 per cent.

At the micro level, local consumers have expressed concern at an imminent increase in milk prices.

Shortly after, Duong Thi Quynh Trang from Big C Supermarket said the company had received a request from the Meiji milk distributor to raise the price of its product. Yet, the adjustment had not yet been made as Big C refused the distributor’s recommended price, Trang said.

Producers have attributed milk price increases to a rising US dollar and increasing prices of inputs: materials, transport and production fees.

Consumers tighten spending

With minimum wages remaining stable consumers have been faced with rising costs of products and services, forcing a tightening in spending after the Tet (Lunar New Year) holiday.

One consumer who was interviewed, Hoang Mai Khanh, said the recent successive increases in the price of utilities: petrol, gas, electricity and water, had cut into her family’s expenditure on food and clothing.

“Both my and my husband’s salaries are barely enough to pay for food and tuition fees for our two children,” Khanh exclaimed, “how can we afford higher prices when our salaries remain unchanged.”

But another consumer, Nguyen Thi Lan, showed her support for rate hike. “If coal prices have increased, why shouldn’t electricity prices? After all, electricity generation is reliant on thermo-electricity,” she said.

But the delay in minimum wage increases was absurd as people were unable to afford the rising costs of products and services. Before measures are put in place to ease the pain of higher prices, the poor would be hurt the most, she added.

Nguyen Thi Lua, a street vendor who earns $2 per day selling fruits from baskets hung on shoulder poles, said “My earnings were already insufficient to get by. Now, everything is more expensive, I do not know how to manage my life.”

Finance Deputy Minister Tran Van Hien said market prices would suffer unfavourable impacts through March.

Price rises would cause a surge in the consumer price index by 0.4 per cent. This is before we take into account prices of imported commodities, which are undergoing slight increases, and the adjustment impact of the US dollar value against the dong.

But Hien expressed confidence that price rises could be brought under control through inspections of trade centres, supermarkets and shops while acknowledging that prices at traditional markets were difficult to monitor.

VietNamNet/Viet Nam News

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Posted by VBN on Mar 3 2010. Filed under Trade. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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