Vietnam power, petrol prices still too low

Electricity and fuel prices in Vietnam remain too low and may need to go up again, its finance minister said, in comments that could reinforce expectations of another jump in inflation.

In February and March the government pushed through two double-digit increases in prices of fuel, including diesel and petrol, and in March it raised electricity prices by an average 15.28 percent.

That was a big factor behind the rise in inflation to a 28-month high in April, when the consumer price index rose 17.51 percent from a year before.

The electricity industry faced losses in 2010 and “if the price of electricity is not adjusted in 2011 the sector will face further losses”, Vu Van Ninh wrote in an article published on Thursday.

The March price hike “was equal to 24.7 percent of the amount of adjustment needed”, he said in the May issue of Communist Review, a ruling party journal.

Industry analysts say Vietnamese electricity prices remain too low to attract enough investment and encourage conservation to overcome a wide gap between supply and demand that causes rolling power cuts.

Officials have said state-run power monopoly Vietnam Electricity would review prices on June 1 and prices may go up again.

On fuel, the government’s price increases amounted to only a portion of the amount needed, factoring in taxes and costs, Ninh wrote.

“If global prices rise, we will adjust domestic prices; if global prices fall, we will restore the import duty to an appropriate level and lower retail prices (if conditions permit),” he wrote.

He said the price of petrol went up 2,900 dong ($0.14) per litre in February but would have had to go up 6,500 dong to meet costs.

The March increase left prices “still below neighbouring countries (Laos, China, Cambodia) by 2,300-5,000 dong per litre”, he said.

Import duties have been slashed to zero from 20 percent and a fuel price stabilisation fund has been exhausted. – Reuters

Tags: Vietnam Petrol prices, Vietnam power prices