Electricity of
Vietnam Group (EVN) is continuing to propose to increase electricity prices for
steel industry. However, leader of the Vietnam Steel Association (VSA) said
that electricity price increase must be equal to all fields. It will be unfair
to increase the electricity price for only steel industry.
Vietnamese Ministry of Industry and Trade (MoIT) said that in 2010
only, electricity industry cross-subsidized for steel and cement production
with a mount of up to 2.547 trillion dong. FDI (foreign direct investment)
steel production joint venture companies benefited more than 506 billion dong
from electricity price.
According to Dang Huy Cuong, head of Electricity Regulatory Department
(under MoIT), the electricity price for life is higher than the electricity
price for productions as we do not encourage people to use too much
electricity. This means that electricity for life is compensating for the
losses of electricity for productions.
Cuong added that remaining such low electricity price for iron and
steel productions may lead to more exports, which will cause power losses. In
the future, if necessary, a proposal to have a specific electricity price
mechanism for iron and steel and cement productions should be submitted for the
government's consideration.
However, unlike the standpoint of power sector, Nguyen Tien Nghi - VSA
Vice President said that, such a calculation is unfair to the steel industry.
According to Nghi, current electricity price accounts for only 0.7% of the cost
rate for steel rolling field and 5-6% in steel billet refining sector. That
means that power is not the important factor of forming steel prices.
So, Nghi said that VSA supports the polity to apply electricity prices
under the market mechanism. But when increasing the electricity price, the rise
should be applied evenly to all areas, but not just steel sector. Steel is an
important economic sector and has a large effect to construction sector,
investment and real estate. If increasing electricity price for only steel
sector in the present context, the market is difficult to accept.
Previously, EVN has required some major steel plants using more power
to build power plants themselves. And some sources said that Vietnam's cheap
electricity price has attracted foreign investors to invest in iron and steel
sector.
Pham Chi Cuong - Chairman of VSA confirmed that foreign investors
investing in Vietnam's steel sector because they see Vietnam's steel demand is
very large but not for cheap electricity.
Experts and some steel companies said that if putting a ban on steel
exports, it will really push the steel sector into more difficult situation,
although steel exports are now only a few hundreds of thousand tons. MoIT has
proposed the government to levy steel export tax from 1.5 - 3% for the reason
of high electricity consumption.
Currently, the domestic steel production capacity has doubled the
demand. The steel inventory is also sufficient for consumption in several
months without additional productions. While the domestic market is slack,
supply exceeds demand, steel exports are indispensable to avoid inventory. So,
with such little exports of steel, a ban on steel export to avoid power loss is
not possible and will cause more difficulties for steel sector.
VSA has several times suggested the government to create conditions to
promote steel exports to reduce trade deficit and resolve the difficulties for
steel consumption.
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