The Ministry of Finance (MoF) has asked the Government to stop the electricity subsidy for poor households from next year because of its negative impact on the national poverty elimination policies.

A 110kV transformer station in the northern mountainous province of Lao Cai - Illustrative image

In five years from 2011 to 2017, more than two million poor households received financial supports for their electricity bills with 8 trillion VND (344 million USD) allocated from the State budget. In 2018, the State Bank plans to use 1 trillion VND (43 million USD) to help about 1,800 poor households with their electricity bills.

When the policy started in March 2011, a poor household received a monthly subsidy of 30,000 VND (1.3 USD) for 50kWh. From December 2017, the subsidy was raised to 51,000 VND (2.2 USD) a month.

Although it has helped to ease financial burdens put on poor households, the policy has still showed several drawbacks, including affecting the national sustainable poverty reduction strategies in the long term.

According to the MoF, the unconditional cash assistance takes away poor households’ momentum to escape from poverty and creates a dependent mindset among them.

Therefore, for the period between 2019 and 2020, the MoF has proposed two alternatives including withdrawing the electricity subsidy or using its financial resources for the Zero Hunger Action Programme.

The survey conducted by the MoF on 53 provinces revealed major approval for the first plan. Therefore, the ministry asked to end the electricity subsidy for poor.

Several experts endorsed the proposal.

Economist Bui Trinh compared the support as a drop in the ocean.

“The monthly electricity subsidy of 51,000 VND should be eliminated as it is so small and no poor households can really feel they are being supported,” he told Nong thon ngay nay (Countryside today) newspaper.

 “The poorest are those who have to rent houses. Many tenants living in rooms of only 15s.qm but have to pay high electricity bills as landlords overcharge,” he added.

Economist Dinh Tuan Minh said the withdrawal would encourage poor households to be conscious of their electricity usage. The responsibility of implementing welfare programmes should be shouldered by the Ministry of Labour, Invalids and Social Affairs, not enterprises.

“We should not use policies to intervene in the pricing system,” he said.

“Electricity providers will operate effectively when they pay attention to their own work instead of bothering to issue subsidy policies for poor households,” he added.

Ngo Tri Long, former head of Price and Market Research Institute under MoF, said that EVN built their own pricing structure, offering a special deal for the first 50kWh. The more electricity one consumes, the higher he has to pay. The structure accelerates power saving and embraces social welfares at the same time.

“The Government’s help must encourage poor households escape from poverty on their own. In other words, we should give them rods not fish,” he said.

Meanwhile, Dang Quan Dieu, former head of Policy Department under Vietnam General Labour Confederation, said it was impossible for MoF to withdraw a social welfare policy for poor households.

“The change of electricity price may create little impacts on normal families. For low-income households, they need support to reduce poverty sustainably,” he said.

According to Dieu, poor families should enjoy welfare programmes with clear blueprints such as subsidies of electricity, social insurance or tuition fees.-VNS/VNA