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NEWS UPDATES 17 August 2010

Energy group asks for big price hike

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The Viet Nam Energy Association has asked the government to raise electricity prices next year, retaining subsidies only for poor and people covered by special government policies.

The business group wants the tariff to be raised to VND1,500 (US$0.07) per kilowatt-hour from the current VND950 for all middle and upper-income consumers while keeping it at VND600 for the first 50kWh for the subsidised categories of consumers.

Currently the subsidised price applies to all categories.

The VEA also proposed setting up a corporation to oversee electricity prices for subsidised consumers.

It said the current price of VND950, or 0.5 cents, is too low to attract investors to the electricity industry. A price of 7 to 8 cents is considered profitable.

In the first six months this year, the State-owned Electricity of Viet Nam (EVN) produced 27.6 billion kWh and bought another 18.36 billion kWh from outside producers, making a loss of VND3 trillion ($150 million) in the bargain.

The EVN can meet only 30 per cent of the investment needed to build power plants and distribution systems while there has been no foreign investment in build-operate-transfer projects since 1997.

The VEA also urged the Government to increase the prices of gas and coal.

"There is no reason for electricity prices to rise at this time since input costs are stable," Nguyen Van Be, general director of the Sai Gon – Linh Trung Processing Zone, said.

"In fact, the current tariffs are too high."

"Local businesses are trying to overcome the consequences of financial crisis. If VEA's price increase is approved, normal life and business operations will be hit severely."

Nguyen Hai Trieu, general director of Northern Viking Technologies company, said the electricity industry's stock answer for increasing tariffs was that they were lower than in neighbouring nations.

"However, the industry can [afford to] pay thousands of billions of dong in bonuses to their staff each year.

"Many companies using a lot of electricity, like in manufacturing and seafood, will have to stop operating because right now we hope to make a small profit of 1 – 2 per cent."

Hoang Van Tieu, director of the Rong Vang Construction Consultancy Company, said: "To increase the tariffs, the power sector should set out a clear road map.

"The industry must improve labour productivity and cut costs."

He asked the government to study the impact of increasing the tariffs on all sections of society.

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