Vietnam is likely to raise power prices in March as input costs have increased sharply, officials said at a government press conference early this week.
Do Thang Hai, vice minister of industry and trade, said the ministry has not decided by how much to increase prices, but a hike is inevitable.
Hai said the ministry has been delaying such a move for some time in order to keep the market calm during the year’s largest festival, the Lunar New Year, which peaked on February 19.
He said oil prices were falling, but only 0.55 percent of Vietnam’s power production depends on oil.
Coal power, on the other hand, accounts for more than 32 percent of the total production, he said, pointing out that coal prices surged 22 percent between August 2013 and July 2014.
The monopoly supplier Electricity of Vietnam (EVN) has proposed a hike of 9.5 percent, from the current average of VND1,508 (7 US cents) per kWh.
Hai said the ministry will decide and inform the Prime Minister this month.
His ministry only has to consult the Finance Ministry if EVN proposes an increase rate higher than 10 percent.
Economists have questioned the government’s objectivity when dealing with the state giant, demanding an independent unit to look into its pricing and management.
But Hai said the government is just trying to set a more acceptable price level to attract private investors to make the country’s power market competitive, adding that currently power prices are low.
He said the World Bank has forecast that private power plants will be the trend of the next five years, with private investors expected to hold a combined 70 percent market share.
EVN has been increasing prices every year.
Economists said auditors should look into its staffing and production process to see if the giant has made any real efforts to reduce costs.
They said any price hike is sensitive at the moment when Vietnam’s businesses are struggling and people are still very cautious with spending.
During the conference, government officials also pledged to review businesses' conditions and will provide support such as cutting interest rates and red tape.