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Local coal prices 10% lower than exports
The Viet Nam Coal and Mineral Industries Group (Vinacomin) will now be required to sell coal for the domestic market according to market rules.
In an official letter on Wednesday, Prime Minister Nguyen Tan Dung detailed the deregulation of the coal industry.
The new price of coal for domestic consumption, excluding coal for the electric industry, must be no more than a maximum of 10 per cent lower than the export coal price.
Vinacomin must adjust current coal prices under the direction of the Ministry of Finance and the Ministry of Industry and Trade and have set new prices by the fourth quarter of this year, Dung said, adding that the new prices and rate calculation methods must be made public.
Coal used for generating electricity will be subject to market forces from 2010.
Vinacomin said coal currently was sold at four different rates, including one for the production of electricity, one for production of paper, fertiliser, and cement, one for other consumption and one for coal exports.
Tran Xuan Hoa, Vinacomin general director, said the group proposed one selling price of coal instead of selling at four different rates to limit coal smuggling.
An additional benefit from the deregulation of the coal industry would force other production industries to enhance savings and improve technology to increase the effectiveness of production and business, Hoa said.
Opening the price of coal to market forces worries fertiliser, paper and cement industries, which use coal in their production processes.
Nguyen Gia Tuong, deputy general director of the Viet Nam Chemical Corporation, said fertiliser producers would be forced to increase the price of fertiliser, because buying coal accounted for 60-70 per cent of the cost of fertiliser production.
Vo Sy Dong, general director of the Viet Nam Paper Corporation, said if selling price of coal increased as scheduled, paper production costs would increase by 3 per cent.
The increased retail price of these products due to production cost increases would make consumption of the products fall further, Dong said, adding that current consumption was already 30 per cent lower than during the same period last year.
The cement industry could hardly avoid increasing the retail price of cement if the price of coal increases, said a representative of the Viet Nam Cement Corporation.
The Ministry of Industry and Trade said the coal industry supplied 11.2 million tonnes of coal for domestic consumption in the first seven months of this year, 1.8 per cent higher than the same period of last year.
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