The 6.8 percent increase in retail electricity prices from March 1 will be the only power price hike this year, Deputy Industry and Trade Minister Do Huu Hao said.
The government only allows power prices to change once a year, Hao said at a press conference in Hanoi Friday.
He said the government was planning a new power pricing mechanism for 2012 with different price levels during the dry and rainy seasons. Electricity would be cheaper in the rainy season as hydropower plants can then increase their output.
Hao said the price hike next month was inevitable due to increasing production costs for the power industry.
ââ‚¬Å“The 6.8 percent increase has been considered carefully to make sure it will not have a huge impact on consumers and the economy,ââ‚¬ he said.
According to the Ministry of Industry and Trade, the manufacturing sector will have to pay an extra VND2.63 trillion (US$138 million) for power costs this year.
Manufacturers operating around the clock will see their production costs increase by 2.83-3.15 percent after the power price hike, while the increase rate for steel and cement producers will be between 0.2 and 0.69 percent, the ministry estimated.
Director of the Department of Price Management at the Ministry of Finance, Nguyen Tien Thoa, said the government would impose harsh penalties on businesses that raise prices to unreasonable levels after the power hike.
ââ‚¬Å“Most essential products, including fuel and medicine, have their prices registered with the government,ââ‚¬ he said. ââ‚¬Å“The government will monitor prices carefully.ââ‚¬
Vietnam still has the lowest power prices in South East Asia, the Industry and Trade Ministry said. Electricity will retail at around 5.54 cents per kilowatt-hour starting next month, lower than prices in Indonesia (6.77 cents), Malaysia (7.6 cents), Singapore (13.07 cents) and Thailand (8.5 cents).
The hike would cost the country 0.34 percent in economic growth and would push inflation up 0.16 percent, the ministry forecast.
Reported by Kap Thanh Long