Producers shouldn’t be allowed to raise prices as much as they want

Coal and electricity producers have demanded a rise of the retail prices by 30-40 percent. However, Nguyen Tien Thoa, Director of the Price Management Agency, the arm of the Ministry of Finance (MOF), thinks that the prompt price marketization may kill the industries and sectors.

The beginning of the year is the time when coal and electricity price producers discuss the pricing mechanism. Both the producers have proposed that the Government raises the retail prices, saying that if the proposal is not approved, they will continue incurring losses and will not have money for re-investment.

Nguyen Tien Thoa, Director of the Price Management Agency, on one hand, admitted the necessity to raise the prices, on other hand, said that the producers should not be allowed to raise prices as much as they want.

Coal, electricity producers and petroleum distributors have been insisting on raising and applying the market prices for their products. Has MOF made a decision on the issue?

When we say that the prices should not follow the market prices, this does not mean that the producers can raise the prices as much as they want. We need to consider the benefits of the involved parties before making decisions. If we marketize the coal, electricity and petroleum prices at the same time, many industries will not be able to stand the price increases, because the competitiveness of Vietnamese enterprises in the world market remains weak.

The State, as the regulator of the national economy, will have to think about when to allow raising the prices and how high the increases should be in order to realize the plan to curb the consumer price index at seven percent in 2011.

The Vietnam Coal and Mineral Industries Group has proposed to raise the sale price by 40-45 percent applied to power plants, and by 30 percent on

The Prime Minister has instructed that the coal prices applied to cement, fertilizer, paper and electricity producers should be raised gradually in accordance with the approved plans, Meanwhile, the coal prices applied to other consumers are equal to 90 percent of the coal export prices.

In this context, the coal price increases should be a little over 20 percent for electricity, cement, fertilizer and paper producers.

We are still waiting for the Ministry of Industry and Trade to send the coal price increases projects, and we will calculate the detailed price increases after considering the suggested projects.

Regarding the electricity pricing in 2010, the Ministry of Finance believed that it was necessary to increase the electricity price by 10 percent, but the Government finally approved the 6.8 percent price increase. Meanwhile, some sources said that the electricity price may I increase by over 30 percent. What do you think about the proposed price increase?

To date, we still have not got the detailed projects to consider. However, I can say for sure that the Ministry of Finance is consistently following the principle that the electricity price should be adjusted in accordance with the market rules. However, the question is when and how to adjust.

We will have to consider many factors, including the impacts of the input material price increases on the electricity production, for example, the dong/dollar exchange rate fluctuations, the coal and gas price increases, the oil price increases. We will also have to consider the negotiations on purchasing electricity from China and from BOT projects.

In general, we will plan reasonable electricity price increases which are high enough to cover the input expenses of electricity production, but low enough to help Vietnamese enterprises ensure their competitiveness on the domestic and international markets.

To date, only the Vietnam Energy Association has voiced its proposal to raise the electricity price by 48 percent to 1400-1500 dong per KWH. What do you think about the proposal?

The proposal has been made on the calculations that I think are still unclear. However, 1400-1500 dong per KWH may be the electricity price in Vietnam in the future

I know the association said that the electricity prices should be high enough to attract foreign investors to the power sector. However, in many cases, we cannot have what we want immediately. – Vietnamnet