Power hikes irk companies

Many Vietnam-based enterprises are in a black mood following a recent power price hike.

Under a recently approved new pricing scheme, the average power prices were increased by 6.8 percent from March 1 to 1,058 dong ($cent 5.53) per kilowatt hour. The price increase was made in lieu of the summer’s increased power consumption.

Like a domino effect, the power price hike has begun to negatively impact on enterprises in most economic sectors, most of which have yet to recover from the economic downturn.

“The power price hike has forced us to raise our selling prices because of surging production and distribution costs,” said Tran Xuan Dung, sales manager of the South Korea-backed CJ Vina Agri Company’s branch in the northern Hung Yen province. The company produces and distributes animal feed nationwide.

“Many other companies like ours are bemoaning the hike has forced them to pay tens of thousands of dollars more for production per month, while they are also being pressured by a pay rise for workers amidst the labour supply shortages,” he said.

Meanwhile, a Hanoi-based Sheraton Hotel sales division representative said: “An increase in room rates is the only way to compensate for the power cost hike. But the hotel does not plan on doing this and may even drop the rates to lure in more guests over its rivals. ”

The southern Binh Duong-based Hiep Long Fine Furniture Company general director Huynh Quang Thanh said electricity spending normally accounted for 6 percent of his company’s total production costs.

“But, together with the upcoming water price hike, the power price increase may push our spending on water and electricity to over 10 percent of our total production costs,” Thanh said.

Nguyen Thi Bach Tuyet, director of the HCM City-based Vuong Tien Consultation, Design and Construction Limited Company; said: “Most of our contracts have fixed prices, so the price hike will make it hard to persuade our partners to adjust their contracts.”

Thomas Bo Pedersen, managing director of the Danish-backed Mascot International Vietnam Company, which produces work wear products, said any increase in costs was a negative factor for any company.

“The competition in the market is fierce, so we shall try to avoid any price increases,” he said.

The National Financial Supervision Commission’s vice chair Le Xuan Nghia said that the power price hike would cause a 0.16 percent increase in the country’s consumer price index.

According to the Ministry of Industry and Trade (MolT), the power price hike would force manufacturers to spend nearly 2.63 trillion dong ($142 million) more on electricity, making up 0.36 percent of the industrial production’s added value in 2010.

The MoIT reported that enterprises with 30-40 percent of their production costs earmarked for power consumption would have to increase their product selling prices by 2.83-3.15%. Meanwhile, production cost increases through electricity price hike for other industries would also sit at I%.

Ta Chi Dung, manager of Hanoi-based Japanese-backed MHI Aerospace Vietnam Company’s Administration Division, said it was a shame enterprises could not negotiate electricity prices with Electricity of Vietnam (EVN), the country’s existing sole power distributor.

“The state’s electricity monopoly is badly affecting enterprises’ operations. The country’s electricity market will become more competitive when private companies can participate in this lucrative market,” he said.

Sharing the same view, vice chair of HCM City Handicraft and Wood Industry Association Huynh Van Hanh said the power price hike was too high and went against E~’ s recent promising revenue reports.

He said it was unreasonable for EVN to always report high profits, while continuing to increase its power prices.

“If these increases are a must, then they should be lower, and not enforced just as the country is trying to get out of the global financial crisis,” Hanh said.

Tags: Vietnam electricity, Vietnam electricity price, Vietnam energy