Vietnam to hike power rates: state media

A street vendor walks past an electricity pole with individual metering boxes in downtown Hanoi

HANOI — Vietnam will raise electricity prices by 15 percent to help attract investment for new power plants in the energy-hungry nation, official media said Tuesday, adding to concerns over inflation.
Prime Minister Nguyen Tan Dung approved the increase of 15.28 percent, to take effect next month, but has also announced measures to help control rising consumer prices, Vietnam News said.
Pham Chi Lan, a former government adviser, said keeping prices under control would be difficult. On top of the electricity hike, the price of petrol may also go up soon after a currency devaluation this month, she said.
The devaluation, the fourth since late 2009, is expected to boost the cost of imported fuel.
Inflation in Vietnam has accelerated every month since August 2010, hitting 12.17 percent year-on-year in January, far higher than its neighbours.
But higher electricity rates are needed "to mobilise investment for new power plants to meet the country's burgeoning power demands," Vietnam News quoted Ta Van Huong, head of the energy department at the Ministry of Industry and Trade, as saying.
The government says power prices in Vietnam are lower than those in other countries in the region, while demand for electricity is expected to increase by at least 16 percent in 2011.
The European Chamber of Commerce in Vietnam (Eurocham) has said the current energy price is too low to attract investors to the sector.
Vietnam draws more than one-third of its electricity from hydropower, which leaves the system vulnerable to droughts that lead to blackouts.
"This year the country will face a terrible shortage of electricity," Vietnam News quoted Phuong Hoang Kim, a deputy director in the science ministry, as saying this month.
Vietnam is trying to diversify its power sources. In October it signed a deal with Russia for its first nuclear power facility.
The government says it will provide subsidies to low-income people to mitigate the impact of the latest electricity price rise.
To help control prices, the prime minister has vowed to cut state expenditures by 10 percent through measures including the delay of non-essential projects, Vietnam News said.
"It's not enough," because of inefficiency in the large state sector, said Lan.
Dung also endorsed a State Bank of Vietnam proposal to lower the target for credit growth, or loans, in the commercial banking system from 23 percent to 18 or 19 percent, it said.
Along with inflation and a struggling currency, the government faces a complicated mix of problems including a trade deficit that reached an estimated $12.4 billion last year.
AFP