HANOI: Electricity prices must be market-based to encourage power savings and new investments in the energy sector, experts say.
The government subsidy for electricity is no longer appropriate given that the country is to continue facing a power shortage for socio-economic development.
According to economist Tran Dinh Thien, electricity prices in Vietnam are subsidised by the government to maintain a low level with the aim of supporting the disadvantaged in society, despite rising input costs.
The subsidised electricity prices have caused a market imbalance, where power producers such as Vietnam Electricity suffer heavy losses and the market experiences a supply shortage.
“High electricity prices are not as big a problem as power cuts,” said Thien, who added that market-based pricing should lead to the development of the electricity industry.
He said that electricity prices should be sufficient to cover product costs, while the government’s subsidy must be separated from the pricing.
“Electricity prices must ensure a balance between generation and consumption.”
Nguyen Tien Thoa, former director of Price Management under the Finance Ministry, said that the prices were reviewed for adjustments every six months, since August 2017, within a mechanism for adjusting the average electricity price.
Over the past six years, electricity prices had been adjusted only three times, which did not accurately reflect market fluctuations, he said. — Viet Nam News/ANN