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Electrical rates may rise 5-10 percent   2012-05-14 - VNS

Electricity prices may rise by between 5 and 10 per cent, if a proposal by the country's power provider Electricity of Viet Nam (EVN) is approved.

Head of the Ministry of Finance's Price Management Department Nguyen Tien Thoa, said EVN had three proposals on the table of price rises between 5 and 10 per cent.

Thoa said electricity production input costs had risen by 3.3 per cent, since the last price rise in December last year.

He said factors influencing the price rise included an exchange rate rise of 0.6 per cent, gas fuel price rises of 10.4 per cent, and a 40 per cent rise for FO oil, while coal prices decreased by 0.3 per cent.

EVN's production costs went up by more than VND15 trillion (US$714.2 million) due to exchange rate differences and other rising costs, he said, adding that the ministries of Industries and Trade (MoIT) and Finance (MoF) would review the proposal in the upcoming time.

A representative from the MoIT's Electricity Regulatory Authority of Viet Nam said the electricity price hike would be calculated by the two ministries with the target of making the price in line with the market economy while ensuring efforts to further curb inflation.

According to Government Decision No 24 on electricity management, EVN can raise power prices by a maximum of 5 per cent, if input costs rise by up to 5 per cent. With the 3.3 per cent increase in input costs, the electricity price hike would be possible.

Nguyen Minh Phong, head of the Ha Noi Institute for Socio-economic Development's Economic Research Division, said an electricity price adjustment would be normal in the context of the market.

However, Phong said the electricity price hike in the context of an economic downturn which put some businesses into bankruptcy.

He said calculations on petroleum and electricity prices had not been clear, resulting in an increase instead of a decrease.

Electrical rates to be set by enterprises, not centrally

The ministries of Finance and Industry and Trade have asked the Prime Minister to revise a part of the Law on Pricing related to retail electricity rates. Under the draft, the PM would only approve frameworks for electricity rates while the exact rates would be decided by enterprises.

The Mininistry of Industry and Trade, in a document submitted to the PM late last month, said the draft Law on Electricity stipulates that the retail rates would be classified by electricity units and approved by the PM. The Law on Pricing therefore should follow this direction, according to the ministries.

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