Vietnam manufacturing sector frets as power prices rise

By Nguyen Hoai   March 10, 2019 | 04:34 am PT
Vietnam manufacturing sector frets as power prices rise
Power prices will rise 8.36 percent at the end of this month. Photo by VnExpress/Ngoc Thanh
Manufacturing firms are worried about having to produce at contracted prices with costs pushed up by higher power prices.

Many have already begun to make adjustments to their production plans to "conserve electricity at every possible stage".

According to a recent announcement by the Ministry of Industry and Trade, power prices will rise 8.36 percent at the end of this month.

Average electricity prices will go up from VND1,720 (7.4 U.S. cents) to VND1,864 (8 cents) per kWh exclusive of VAT, a unit increase of 0.6 cents.

"Manufacturing companies like us will certainly suffer losses, so we have to adjust our production," said Nguyen Sy Hoe, deputy general director of Phu Tai JSC, a wood and stone processing company.

Hoe noted that the company has begun investing in modern technology aimed at saving electricity at all production phases.

"Management agencies need to clearly publish the roadmap for implementing this price rise so that producers like us can make timely adjustments," he added.

The leader of a wood processing enterprise in south central coastal province of Binh Thuan also said his company will be hit hard as wood processing uses a lot of electricity. The company currently pays over VND1 billion ($43,207) per month for electricity, and would need to pay another VND200 million ($8,614) once the hike takes effect.

"Although we have planned our production schedule to take maximum advantage of off-peak hours, final prices will have to rise by at least five percent," he said, adding that businesses will have to compensate for losses from fixed price supply contracts that have already been signed. For orders in the second half of the year, the company is planning to re-negotiate prices.

Electricity prices are charged based on 6 levels, based on how and when it is used.

Prices will be higher for business activities (as opposed to household use), at 248 percent of average price during peak time and 75 percent at off peak times, depending on voltage. Industrial production, on the other hand, receives a more preferential rate of between 167 and 52 percent depending on the time of day that electricity is consumed.

Selling prices will definitely need to be adjusted, Phu Tai JSC deputy general director Hoe said, but the amount will depend on market demand.

According to the Ministry of Industry and Trade, the power price increase could raise the consumer price index (CPI) by 0.26 - 0.31 percent. Vietnam's CPI increased by 3.54 percent in 2018.

Vietnam, one of Asia’s fastest-growing economies, has been struggling to develop its energy industry.

World Bank country director for Vietnam Ousmane Dione said at a recent forum that Vietnam will need to raise up to $150 billion by 2030 to develop its energy sector.

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