Vietnam News Network

Hearing about the Ministry of Industry and Trade’s plan to raise the electricity price, people worry that they will be burdened by the price increases, while businesses say they will meet big difficulties in production.

Electricity price increase plan submitted to Government

People weeping

“In winter, we just light two lamps, and use electricity for the TV and refrigerator. In summer, the use is 1.5 times higher. Tri said that she gets VND1mil in pension and some VND1mil a month from selling rice gruel every morning, and the electricity price increase will force her to spend less on other items.

People wonder why the Electricity of Vietnam (EVN) has decided to raise the electricity price at this ‘sensitive’ moment. Tu, a motorbike keeper in Giang Vo residential quarter, said that while producers and service providers have been trying to slash sale prices, EVN is still attempting to raise prices, which will trigger a new price increase wave. Tu said that he has to spend over VND200,000 on his electricity bill every month.

Students prove to be the most anxious about a electricity price increase. Minh, a Phuong Dong University student, who lives in a boarding house on Nguyen Phong Sac street, said that he has to pay the fixed sum of VND50,000 a month. “If electricity is raised further, I will have to cut expenses on meals,” Minh said.

Businesses complain

Pham Chi Cuong, Chairman of the Vietnam Steel Association, said that steel producers met a lot of difficulties last year due to the slow sales of products. Several ingot steel mills have had to stop production for 2-3 months.

Cuong said that the spending on electricity accounts for 10% of the steel production cost. It takes some 500KHW to make one tonne of ingot steel, and 400KWH to churn out one tonne of steel. Therefore, any electricity price increase, big or small, would put big difficulties on steel mills.

He went on to say that the association has asked the government and the Ministry of Finance, if the electricity price increase is compulsory, to delay the VAT increase implementation for steel producers (as of January 1, 2009, VAT on steel products has been raised from 5% to 10%).

Le Quoc An, Chairman of the Vietnam Textile and Garment Association, on one hand, agrees that Vietnam should raise the electricity price to attract more investors, on the other hand, said that it is not the right time for the price increase.

An said that a price increase at this moment would make it unbearable for textile and garment companies. Expenses for electricity now account for 15% of the production cost of the fibre industry, and if the price increased by 10%, the production cost would increase by 2%. This would make textile and garment industries less competitive in price in comparison with China-made products.

Dinh Son Hung from the HCM City Economics Institute also said that the electricity price increase should not be carried out at this moment. Hung said that 2009 has been forecast to be a difficult year, and the government will have to take measures to stimulate demand. The electricity price increase will surely annul the efficiency of the demand stimulus measures.

Hung added that it is not advisable to raise either electricity or petrol prices at this moment, as the two products are input materials of many industries.