VietNamNet Bridge – Vietnamese businesses have been on the tenterhooks, because they understand that the electricity price would increase in some days, following the petrol and coal price hikes.

A new price increase wave?

 

 

Since April 20, the coal price at which the Vietnam Coal and Mineral Industries Group (Vinacomin) sells to power plants has increased to the level which is equal to the production cost in 2011 and 84 percent of the production cost in 2013.

To date, Vinacomin still has to sell coal to power plants at a loss as requested by the government to help power plants and the Electricity of Vietnam (EVN) sell electricity at low prices.

According to Nguyen Van Bien, Deputy General Director of Vinacomin, in the first quarter of 2013, the coal price applied to power plants just equal to 71-73 percent of the 2011’s production cost and equal to 63-66 percent of the 2013’s cost.

With such low sale prices, Vinacomin has been incurring heavy losses. In the first quarter of 2013 alone, the value of the coal sold to power plants was VND1.5 trillion lower than the 2013’s production cost. Meanwhile, the amount of coal sold to power plants accounts for 50 percent of the total sale of Vinacomin.

In principle, Vinacomin, though having incurred the big loss from selling coal to power plants, still can make profit from the coal exports. However, the exports have been decreasing since Vietnam decided to gradually cut down the exports to reserve coal for thermopower plants. Therefore, Vinacomin has been groaning in losses.

A report of the coal miner showed that the workers’ income has decreased by 10 percent since 2012.

Vinacomin, after a lot of exertion has got the nod on the coal price increase. Bien said that with the new coal price, Vinacomin would receive some VND2 trillion more from the sale of coal to power plants.

Electricity price increase inevitable

According to EVN, the spending on coal amounts to 70 percent of the production cost of thermopower plants. Meanwhile, EVN uses 100 mil kwh of electricity from thermopower plants a day. This means that thermopower plants provide ¼-1/3 of the total electricity sold, and that the production cost of thermopower plants would certainly lead to the electricity retail prices.

After the two price increases in 2012, the electricity price is believed to increase further by 11-13 percent in 2013. EVN said that in the dry season, the hydropower plants in the central region would not be able to provide enough electricity due to the lack of water. Therefore, EVN would have to use 1.5 billion kwh of electricity with FO oil, which would make the expenses increase by VND7-10 trillion.

Now, with the additional expense of VND2 trillion on coal, EVN has one more reason to raise the electricity price. And when the electricity price increases, a new price increase wave would begin.

Businesses sink

According to the General Statistics Office, the CPI increased only by 0.02 percent in April, which seemed to be the right time for raise the electricity prices, because the price increases are believed to have little impacts on the national economy.

However, analysts have warned that the Vietnamese businesses, which have got exhausted when struggling to survive, would sink if the burden on their shoulders gets heavier.

Pham Chi Cuong, Chair of the Vietnam Steel Association, said steel manufacturers would have to pay VND165 billion more a year due to the oil price increase. “The problem would be even more serious, if the electricity price also increases,” Cuong said.

Tran Thuy