Power price hike ruffles feathers

The power sector can hike the power price by 5 per cent without seeking comment from state management bodies in light of Decision 24/2011/QD-TTg. What is your view on the sector’s latest power price hike from July 1?

Starting from July 1, the price of power for living, production and trading was hiked 5 per cent or VND65 per kWh, reaching VND1,369 per kWh (or VND1,506 per kWh if value added tax is included).

Under market rules, the price of commodities going up and down is usual. But, within the past decade the power price has experienced eight revisions, with the average power price (VAT not include) surging from VND706.8 per kWh in 2002 to VND1,369 per kWh currently. That is abnormal.

Firms and people are in financial dire straits, hence the power price should go down instead of going up as recently to support their difficulties.

The power sector insisted the price hike matched market rules on the back of rising input costs. Is that the case?

Under the market rules pricing is fixed by the supply-demand relationship. In fact, around 70 per cent of firms are facing going bankrupt, dissolved, halting operation or retrenching production, thus lowering power demands.

Meanwhile, this year besides Son La Hydropower Plant a string of smaller hydropower plants will be commissioned, such as Dak Mi 4 and Nho Que 3, resulted in rising power sources. In this context there is no reason for power price hikes.

Power is a special kind of goods with direct impacts on firms’ production trading, state budget revenue and people’s life. Hence, hiking power price should also factor on economic development needs as well people’s subsistence conditions.

Is Vietnam’s current VND1,506/kWh power price costly compared to that worldwide?

Current power price equal to 7.2 cents per kWh which is not cheap compared to other countries. For instance, it is around 7 cents in Colombia, 7.6 cents in Costa Rica and 6.2 cents in Paraguay while it is only 4.5 cents per kWh in India and Pakistan.

Besides, the power price should be appraised based on people’s income standards. The power price in Denmark is 32.2 cents per kWh, in Holland 28.5 cents, in Japan about 20 cents, in Singapore 14.3 cents and in South Korea 10.2 cents per kWh.

However, power cost is insignificant to people’s incomes in these countries whereas with current 7.2 cents per kWh, Vietnamese people have to spend not a small amount of their incomes into electricity bills each month.