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Peak-hour power prices puzzle firms
Many enterprises are facing a difficult choice with the recent decision by the Ministry of Industry and Trade on electricity prices at peak hours: whether to stop production during these times to save money, or to keep active to maintain their productivity.
According to the ministry’s new regulation, the price of electricity used for production purposes will be doubled during peak hours, from 9:30am to 11:30am and from 5pm to 8pm, Monday through Friday.
Many enterprises have complained about the losses they will face when the prices are increased.
Deputy Minister of Industry and Trade Do Huu Hao said the ministry would take into consideration enterprises’ difficulties making the necessary changes. Meanwhile, he added that the regulation was aimed at encouraging enterprises to divide their production into more shifts, other than simply day and night shifts. He said that a third shift would be one solution to save on electricity costs.
"Changes will be made only in cases where the newly issued regulation is seen to be irrational," he said.
Big trouble, little profit
Many inspection groups in southern Long An and Tien Giang provinces have been sent to enterprises to evaluate the advantages and disadvantages of the regulation.
In the case of the Ching Lua Shoe Company in Ben Luc District of Long An Province, electricity costs accounted for 7 per cent of its production costs. The new regulation would make the company spend VND330 million (US$19,000) more each month.
To deal with this, many enterprises have chosen to cease production during these peak hours.
Tran Van Thai, director of Thang Dat Enterprise in An Thanh Industrial Zone, in Tien Giang Province, operating in rice husking and polishing, said his enterprise would not operate during peak hours.
"I have to watch the time so that I can have my workers stop when the clock hits 9:30am," he said.
"I would see huge losses if I kept up production during those hours, as the price of electricity is too high," Thai said.
But it was hard for him, as clients were still urging him to deliver rice on time.
Employees at his workshop, after the machines stop at 9:30am, become "unemployed" until 11:30am.
Pham Xuan Hong, president of the Board of Management of Sai Gon 3 Garment Company, said such regulations were irrational. Previously, peak hours were from 6pm to 10pm. With the new set peak hours, his company would have to pay VND700 million ($40,000) more in 2009 compared to 2008.
Avoiding peak hour production is not a feasible solution for many companies.
According to Duong Ngoc Minh, general director of the Hung Vuong Company, aquaculture producers could not stop their production during peak hours like other enterprises.
With 6,000 employees working on an assembly, the enterprise could not let employees rest for two hours in the middle of a shift. Moreover, if the machines were turned off, products like fish and shrimp would spoil, Minh said.
Such difficulties could not be solved by simply adding third or fourth shift.
Some businesses said that female employers were not as willing to work later shifts. At other companies, complications could arise from contracts for extra payments during late shifts and extra spending, all of which were more burdens the firms would have to bear.
"With such difficulties, competition from other countries will be much harder," said Nguyen Thi Xuyen, director of the Dai Duong Electricity and Machinery Company in Ha Noi.
The increase in electricity prices during new peak hours will cause products to rise by VND100 per kilogramme, which is against the Government’s plan to encourage spending and production.
"The new regulation will cause many hurting enterprises to cease operations, and many workers to lose their jobs," said Nguyen Huu Chi, chairman of Tien Giang Province’s People’s Committee.
VietNamNet/Viet Nam News
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