Deputy standing Prime Minister Nguyen Sinh Hung said Thursday that the price hike in electricity and petrol is necessary while the finance minister maintained that a 62% increase in power rates is needed for the electricity sector to have profits.

Prices of petrol and electricity are currently not in conformity with market rates, Hung said during an online conference in Hanoi.

“We are on the market rate roadmap”, he added.

The hike in petrol and electricity fees is to offset losses for Vietnamese enterprises.

Hung said that a low electricity fee would result in lack of investment in the power sector, leading to a shortage of electricity.

A low price also inadvertently causes people to use electricity wastefully.

Meanwhile, petrol prices in Vietnam for a long time stayed at a little over VND16,000 per liter, one third lower than rates in Thailand, Laos and China which are around VND24,000-VND26,000.

If this situation continues, it will not only discourage savings but also causes petrol to be smuggled to other countries [to be sold there where the price is higher].

A whopping 62% hike needed

Meanwhile, finance minister Vu Van Ninh said at the conference that by February 2010, the electricity sector has lost nearly VND28 trillion and by the end of this year, the loss is estimated at nearly VND57 trillion.

To have profits, electricity prices must be raised by 62%, Ninh revealed – not the 15% increase to take effect next month.

And if the price is to be adjusted in accordance with world rates, petrol prices should be raised 34-40%.

Deputy PM Hung added that this price increase in petrol taking effect today will not bring any profit to the sector.

He also assured that poor households will be supported by the government in paying electricity bills.

Earlier, the government has said it would grant US$1.4 in allowance to each poor household per month to settle the bill.

But they must meet certain criteria in order to be certified as “poor”.

First priority: curb inflation

Also at the conference, Prime Minister Nguyen Tan Dung emphasized the need for the country to curb inflation and stabilize macro-economy.

Priority must be given to strictly and cautiously putting into action the monetary policy, controlling the growth of credit under 20 percent while granting preferential credit to agricultural production, supporting industries and investment in essential areas with transparent management, he noted.

He also asked the State Bank of Vietnam – the central bank - to mobilize and utilize all the sources it could to control the exchange rate and prevent the exchange rate from fluctuating.

After the conference, state-owned groups and corporations must sell all their foreign currencies to the banks to sell to businesses at the regulated price when they are in need, said the PM.

Regarding the implementation of the fiscal policy, PM Dung demanded an increase of 7-8 percent in income, savings in expenditures by 10 percent and a cut in over-expenditure to below 5 percent, Vietnamplus reported.

He also demanded a drop in imports of goods that can be produced locally and to reduce the trade deficit to ease the exchange rate.

The government leader confirmed that it is essential to increase electricity and petroleum prices and proposed that the ministries and local authorities assist poor families with their electricity bills.

He also asked the media to promote information on the advantages and difficulties to help the people understand the situation and create a consensus to successfully implement the tasks.

The price of petrol (A92) has increased by VND2,900 (14 cents) to VND19,300 per liter as of 10 am today, along with increases in prices of diesel, oil and mazut.

The average power price will rise by 15.28 percent to VND1,220 per kWh starting March 1.

Source: Tuoi Tre