Firms face power shock

Power price hike will have repercussions for industry, and ultimately consumers

EVN received approval from the Ministry of Industry and Trade on July 31 to increase power price to 1,508 VND (7.3 cents) per kWh, explaining the new move was aimed to compensate for increased expenditure on coal and gas.

“Coal price has risen by 37-41 per cent since mid April 2013,” it claimed in a press release last week.

The power price hike is bound to affect enterprises in all sectors who will naturally pass some of the burden onto consumers.

Vietnam Small and Medium-sized Business Association chairman Cao Sy Kiem told VIR such a 5 per cent rise, which “is too surprising for enterprises to get prepared”, would be a “strong blow” to cash-strapped small and medium-sized enterprises  as it would result in price rises on a series of goods and services.

“Both electricity and gas prices have increased which will see a rise in production costs and the Consumer Price Index (CPI) in August,” said Kiem. 

Deputy general director of Vinausteel Joint-Venture Company Lai Quang Trung agreed with Kiem’s opinion.

“The power price hike will definitely bring about increased costs, however, the steel price cannot rise in this market context,” Trung said.

“We will be unable to change the prices previously agreed with partners,” he added. 

The cement sector also faces such difficulties, especially when its inventories remained bloated, according to Vietnam Cement Association  chairman Nguyen Van Thien.

“Other sectors also want to increase their prices, however, only electricity has the priority. Since 2009, EVN has increased its price seven times always with the rationale of keeping up with the region’s electricity price. But how can Vietnamese cost of living compare with other countries’ in the region,” said Thien.

Senior economist Pham Chi Lan said neither a lack of capital nor EVN’s debts were reason enough to raise power prices, especially at a time when there is a lack of clarity about input costs and power pricing mechanisms.