Vietnam plans to phase out subsidies and raise electricity rates from next year to make the sector more profitable and attract investment for badly-needed new power plants, the government said on Oct. 8.
Current state-set retail power prices in the country are below cost and "an adjustment to a market-orientated mechanism is unavoidable," Industry and Trade Minister Vu Huy Hoang said.
Power blackouts are common in Vietnam, where demand has surged with economic growth and is expected to rise by 16% a year until 2010, and by 12% annually afterwards, according to the Asian Development Bank.
But raising power charges is sure to prove unpopular in a country that has suffered double digit inflation for about a year, with consumer prices shooting up 27.9% in September compared to the same month a year earlier. Deputy Industry and Trade Minister Bui Xuan Khu said recently that electricity rates may go up by as much as 20% from next year.
The retail power price now is around 890 dong (5 US cents) per kilowatt hour, but the government will raise prices in 2009 to limit losses after having had to buy more electricity from China in recent years, the report said.
A plan on raising power prices will be submitted to the government in the fourth quarter of this year by the state-run Vietnam Electricity.
Vietnam has for decades generated most of its electricity from coal and hydropower but more recently has shifted increasingly to natural gas, with plans to have its first nuclear power plant operational by 2020.
Copyright Agence France-Presse, 2008