EVN could go bankrupt if it cannot raise electricity prices, ministry says
EVN could go bankrupt if it cannot raise electricity prices, ministry says
The Ministry of Industry and Trade (MOIT) has voiced its support for Electricity of Vietnam’s (EVN) plan to raise retail electricity prices, saying that it would go bankrupt if not allowed to do so.
Deputy Minister of MOIT Do Thang Hai talked to the local press on the sidelines of a recent conference, affirming that if EVN cannot raise electricity prices, it will go bankrupt.
The World Bank (WB), according to Hai, recommended that the retail electricity price in Vietnam be raised by 40 percent in the next three years to “save” Vietnam’s power sector.
WB is considering EVN’s financial situation, production costs and retail prices to decide whether to continue funding EVN’s power projects.
Vietnam has been advised to raise the retail price by 10 percent at least for every six months, from now to mid-2016.
And even if the price is raised as suggested, the retail price would still not be high enough to cover expenses. Low-income earners would have the “responsibility” of reducing electricity use.
Some days ago, EVN also proposed to include other expense items, including gas and coal price increases, higher water resource taxes and environmental protection fees, when calculating the power production costs, which serve to define retail prices.
A source said that EVN must raise the retail electricity price to survive because of the huge loss of VND17 trillion it has incurred so far.
Dr. Ngo Tri Long, former head of the Ministry of Finance’s Price Research Institute, commented that it is unreasonable for EVN to insist on raising the retail price to cover its expenses.
“The explanation given by EVN is just ‘quibbling’. It is unconvincing,” Long said. “It is obvious to everyone that EVN’s productivity is very low, while the loss during electricity transmission is very high.”
The pricing expert recalled the Prime Minister instruction given recently that EVN needs to check its production process to reduce production costs and that it needs to improve productivity and control electricity losses during transmission.
“What has EVN done to implement the Prime Minister’s instruction before it demands a price increase?” Long said, adding that it is unreasonable to raise the selling price, when all the input materials are getting cheaper.
He went on to say that it is unreasonable to compare the electricity price in Vietnam with developed countries.
He said the electricity price in every country depends on the electricity sources.
In Vietnam, 40 percent of electricity is generated by hydropower plants which run at low production costs, and therefore, Vietnamese can enjoy lower electricity prices.
