Vietnam, struggling with severe power shortages, may delay a plan to have full market-based electric prices by a year to 2013 on fears that power price hikes would deepen inflation, the finance minister said on Thursday.
State utility Vietnam Electricity (EVN) group has been facing serious losses and if there is no power price adjustment, it will face difficulties attracting investments, Finance Minister Vu Van Ninh was quoted by the online VnExpress newspaper (vnexpress.net) as saying.
But power prices will rise sharply if the market-based mechanism is applied, and it would greatly affect inflation, Ninh was quoted as telling a session of the National Assembly's Standing Committee.
Vietnam said on Thursday it will strive to contain inflation this year to between 15 and 17 percent, raising its target for the second time in June, during which the annual rate reached 20.82 percent, the highest since November 2008.
In April an EVN official said power prices would jump 62 percent if they were adjusted under the new mechanism, which will set the electricity price based on market supply and demand without government intervention.
"That's why the power price adjustment needs a roadmap," he said. "A full market-based price mechanism would be delayed until 2013."
Earlier this year, Ninh's ministry said it expected electricity prices to be fully market-based next year.
EVN expects to make no profit this year with government-mandated power prices on par with production cost, after running into losses of 15 trillion dong ($731 million) in 2010, an EVN official said.
In March Prime Minister Nguyen Tan Dung approved a plan that would allow EVN to adjust power prices once a quarter, instead of once a year as has been the practice.
Vietnam raised average prices of electricity by more than 15 percent at the beginning of March in a step that industry officials said was necessary to help trim EVN losses.
The manufacturing sector is facing power shortages in 2011, coming as the economy is expected to grow at a slower pace of 6 percent this year and next.
The country has not been able to meet demand for electricity by about 3 percent in the past five years and EVN has said it will need to invest $3 billion a year for infrastructure between 2011 and 2015, during which 38 projects would come online.
Electricity consumption would nearly double to 175 gigawatt-hours in 2015 from 98 gigawatt-hours this year while supply will increase to 196 gigawatt-hours from the current 110.8 gigawatt-hours.