VietNamNet Bridge – The recent moves taken by state-owned corporations and management agencies signal inevitable increases in petrol and electricity prices.

Petrolimex has complained that it has incurred heavy losses due to unreasonable regulations.

The biggest petroleum distributor, which holds 60 percent of market share, has reported a loss of VND1.3 trillion in the fourth quarter of 2014 and VND350 billion in 2014.

Once it incurs loss, it would probably raise selling prices to offset the loss.

Meanwhile, the government has recently proposed raising the environmental protection tax to offset the loss of state budget revenue. The proposal, once approved, would give one more reason for the petrol price to increase.

Under current laws, since 2012, every liter of A92 petrol has to bear at least VND1,000 in environmental protection tax. The floor tax rates on diesel is VND500 per liter, while kerosene and mazut are VND300 per liter.

However, the ceiling tax rates on products stipulated in the Environmental Protection Law approved by the National Assembly in 2010 are much higher.

The ceiling tax rate on petrol is VND4,000 per liter, which means the government has the right to raise the tax rate by four times, while the ceiling tax rate on diesel is VND3,000, or six times higher.

In addition to the petrol price, the electricity price will be raised in the near future.

The Chair of the Government Office, Nguyen Van Nen, said at a regular press conference that the electricity price may increase by 7-10 percent.

He went on to say that the Ministry of Industry and Trade is considering an electricity price plan and a final decision would be made within March.

Three electricity price options of 7.5 percent, 8.5 percent and 9.5 percent were opened to public opinion. Of these, the 9.5 percent increase was most advocated by state management agencies, which said the electricity price in Vietnam needs to be closer to the world’s price levels.

Like Petrolimex, the Electricity of Vietnam (EVN), the exclusive electricity retailer, and the Ministry of Industry and Trade warned that EVN would go bankrupt if it cannot raise the electricity price.

MOIT has voiced its support for EVN plan to raise retail electricity prices. He said the World Bank (WB) recommended that the retail electricity price in Vietnam be raised by 40 percent in the next three years to “save” Vietnam’s power sector. WB is considering EVN’s financial situation, production costs and retail prices to decide whether to continue funding EVN’s power projects.

Nguyen Dinh Cung, head of the Central Institute of Economic Management, commented that the death of EVN, if it occurs, may be good news for the national economy, because it ends the monopoly in electricity distribution in Vietnam.

Kim Chi