Expert says 10 percent electricity price increase is unreasonable

Dr Vu Dinh Anh, deputy head of the Market and Price Research Institute believes the suggested 10 percent electricity price increase is unreasonable and suggests not increasing the electricity price before April 2010

Nguoi lao dong: What are your comments regarding Electricity of Vietnam’s (EVN) suggestion to raise the electricity price from February 1 -one month earlier than the timetable approved by the Government?

Vu Dinh Anh: I think that it would be better to delay the electricity price increase to the end of March 2010. The General Statistics Office (GSO) has not released the consumer price index (CPI) for January, but I think the CPI increase would be less than 1.5 percent. In general, CPI only increases sharply during Tet month, February this year. We need to analyze the figure to consider the time and calculate electricity price increases

NLD: EVN has proposed a price increase of 14 percent at the highest and six percent at the lowest. The Taskforce on Electricity Pricing Management later have suggested three solutions with a price increase of 11 percent at the highest and five percent at the lowest. Which scenario do you think is reasonable?

Anh: There has always been the hard pressure on electricity prices to increase over the last few years. However, in 2008, the Government did not agree to the price increase, because the inflation rate was anticipated to climb very high to over 20 percent, a 10-year record level

In 2009, with the goal of curbing inflation rate at 15 percent, the Government allowed the electricity price to rise by 8.12 percent.

The situation is quite different in 2010. I think that while the inflation rate is forecast to reach seven percent, just 50 percent of the previous year’s level, the 10 percent electricity price increase would be unreasonable. I think that it is necessary to reconsider planned electricity price increases.

NLD: How will the electricity price increases affect the price of goods and services?

Anh: In principle, the electricity price increase will lead to two things, the CPI increases and economic growth rate decrease. Influence levels will still depend on the electricity price increases

Previously, there were the methods which allowed us to calculate the impact of the electricity price on the national economy, for example, how much it will affect CPI and how much GDP growth. However, the method has proved to be unconvincing, because no one can verify it. Therefore, nowadays, when raising electricity prices, they do not pay attention to analyzing these figures any more.

NLD: It seems that the electricity price increase is inevitable. Vietnam will then have to take measures to avoid the massive price increases of other kinds of goods and services. What can be done?

Anh: Ministries and branches are discussing measures to stabilize prices. The Ministry of Finance has amended Circular No 104 on stabilizing the market.

I think that we not only have to keep control over the price increases, but we have also to find out if the prices set by enterprises are reasonable or no

For example, when dairy suppliers sell products at the prices which are double cost prices, these sale prices must not be considered as reasonable.

I think that when sellers sell products at 10 dong when the cost price is just five dong, they must be charged with “violating consumers’ rights”.

As for the electricity price story, it is first necessary to find out if the electricity production cost is reasonable or not, and then consider the price increase.

VietNamNet/NLD

Tags: Vietnam electricity, Vietnam electricity price, Vietnam energy