Vietnam to reconsider electricity prices for steel sector

Vietnam News Service reported that steel and cement producers have been enjoying too many preferences as they can buy electricity at low prices. Experts believe that it is now the right time to eliminate the unreasonable thing.

According to Mr Vuong Dinh Hue, Vietnam’s minister of finance, in 2010 alone, cement and steel producers enjoyed the subsidization of 2547 billion dong as they could buy electricity at low prices. The unreasonable thing has been existing too long

At the latest National Assembly’s session, when explaining to the electorate about the loss incurred by the Electricity of Vietnam, Mr Hue talked about the so called cross compensation in the sale prices applied among the key industries in Vietnam.

For example, power generators now can buy coal at the prices which are just equal to 57% to 63% of the export prices. Meanwhile, the two energy consuming industries like steel and cement have been enjoying higher subsidization level.

Citing the auditing results in 2010, Mr Hue said that the two industries consumed 11% of the total commercial electricity output (982 million kwh). The problem was that the producers only had to pay VND 914 for every kwh used, while the electricity production cost was VND 1180 per kwh in 2010.

As such, EVN has subsidized VND 2547 billion to steel and cement producers. Especially, foreign invested steel producers have got the subsidization of more than VND 506 billion. Power generators can buy coal at low prices, but EVN then has to sell electricity at low prices to key industries.

Well understanding that the electricity price in Vietnam is low thanks to the subsidization, foreign steel manufacturers have been flocking to Vietnam recently to set up steel mills, turning Vietnam into the steel production base for export.

Mr Hue said that “We need to settle the problem when regulating the pricing mechanisms.”

Right after the statement was made, the Member of the National Assembly’s Finance & Budget Committee Mr Nguyen Huu Quang posed a question “Should we encourage steel and cement once the production costs of the products do not truly reflect the real costs?”

Five months ago, the ministry of finance planned to raise the steel export tariff to 3%, because steel producers can enjoy the low prices of coal and electricity which allows them to reduce the production costs. However, the plan was not implemented, because the Vietnam Steel Association said steel producers would rather to accept to pay the electricity market prices than the higher export tariff. The association agrees that raising the electricity price could be considered as an opportunity to eliminate the producers using backward technologies, while helping save energy.

Source Vietnamnet.vn

Tags: Vietnam electricity prices, Vietnam energy, Vietnam energy industry, Vietnam Energy sector