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Industry told to grin and bear electricity rate hike
Electricity prices had to be raised immediately to avoid a looming power crisis and industries have been told they have to cope as best they can by adjusting production times, improving technology and reducing their power use.
Prices increased an average of 8.92 per cent to VND948.5/kWh on March 1 when electricity for domestic use rose by 13 per cent and for industrial use increased by up to 7.5 per cent.
Viet Nam Steel Association chairman Pham Chi Cuong said 700kWh was required to produce a tonne of steel, so the power price hike would increase costs by VND70,000 (US$4) per tonne.
The extra electricty cost for the 2.4 million tonne of pig iron to be produced this year was estimated at VND175 billion ($10 million) which was sure to add to the price of steel, he said.
Electrical Engineering Dai Duong Ltd Co manager Nguyen Thi Xuyen said that where electricity was more than 10 per cent of cost price of a product, the price hike would cause difficulties, especially in the financial crisis.
Deputy director Pham Kim Dien, of Ba Ria-Vung Tau Seafood Export and Import Processing Joint Stock Co agreed.
"Electricity costs account for 15-20 per cent of the company’s input expenditure," Dien said. "The company has to pay a monthly electricity fee of VND500-600 million ($28,600-34,300)."
The electricity price rise would increase costs 1-1.5 per cent and the selling price of products would be adjusted accordingly.
Dien said it would have lessened the burden to raise the price later this year when the global economy was predicted to warm up.
Director of a seafood company Ba Ria-Vung Tau said the company could save on electricity consumption by the reasonable use of lamps and air-conditioners and restructuring the production process.
However, to create long-term savings the company needed to upgrade or install new equipment with new technology.
Economic expert Bui Kien Thanh said rising electricity prices would have a greater impact than rising petrol prices on industries such as iron, fertiliser, seafood, electronic equipment and would flow into the price of products.
Thanh said the short notice given for the price hike would cause problems for firms who already had signed contracts to supply products at a fixed price while other firms were facing a fall in prices on export items of 30 per cent.
Deputy Minister of Industry and Trade Bui Xuan Khu told industries last week that the Government needed to increase tariffs immediately to encourage investment in the industry and avoid a looming power shortage which would have led to power cuts without notice.
Deputy Minister of Science and Technology Nguyen Van Lang, who is also head of the Management Board of the Hoa Lac High-Tech Zone said cutting off power without warning would have been a disaster for some enterprises. For example a batch of electronic components worth millions of US dollars might have to be thrown out.
VietNamNet/VNS
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