Workers of EVN's Dien Bien Phu City Electricity Company inspect power lines. (Photo: VNA) Unavoidable challenges
Lu Nguyen Xuan Vu, General Director of Xuan Nguyen Group, saidthat his group operates in the field of agricultural product processing withmany stages from raw material processing to drying that must use electricity.
On average, his group's factory in Ho Chi Minh City pays anelectricity bill of about 150 million VND (over 6,180 USD) each month. Tworecent electricity price hikes will add 7.5% increase to his business'selectricity costs.
If considered under favourable production and business conditions,this cost was not a big problem, but with the current actual situation, hisfirm would face more difficulties, Vu said.
Since the beginning of this year, both domestic manufacturers andexporters have been under pressure from the market decline, and the purchasingpower of local people has been limited due to the difficult economic situation.
Purchasing power for non-essential goods has decreased clearlydespite the application of many policies to stimulate consumption. Meanwhile,input costs including electricity prices continue to increase, but businessescannot increase product prices.
With current economic conditions, if product prices increased,consumers would continue to take non-essential products out of their shoppinglist. Over time, they would no longer have the habit of using that product intheir daily lives, leading to a narrowing of the market size.
"If we cannot sell our products, it would not only affect ourfactory's processing activities but also cause many difficulties to farmers in raw material areas," Vu toldVietnam News Agency correspondents.
Van Nguyen Vu, Director of Vit Viet Industry Production andTrading JSC, said his enterprise – amechanical manufacturer – needsto pay an average electricity cost of about 200 million VND per month. Thetwice electricity price adjustment would increase the monthly electricity billthat his business had to pay.
At the same time, higher electricity prices would lead to anincrease in many other expenses from raw materials and warehousing totransportation. That might lower the firm's profit amid a small number oforders, Vu said.
Meanwhile, Le Nam Khanh, General Director of Vietnam CementCorporation (VICEM), said input costs for cement production continued to increase as electricity prices roseby 3% – the first time in2023 but at the time, coal prices remained high.
Khanh, however, said that the second electricity price hike wouldhave an impact on the business performance of cement producers.
Adapting to the new situation
As it was inevitable that electricity costs would increase fromthis month, we had to maximise other production expenses to keep product pricesunchanged, Vu from the Xuan Nguyen Group said.
"In the case of maximum savings but production cost stillincrease, we have to compensate for losses to maintain stable selling prices.Previously, we used to operate without making profits to retain customers andmarket size," he said.
In the immediate future, Vu said Xuan Nguyen would try to keeptraditional customers to ensure the operation of the production-processingchain that his firm had built for more than 20 years and to maintain jobs andincome for workers and farmers in raw material areas.
Vu said he hoped that economic difficulties would ease and localconsumers would relax their spending so that his firm could gradually adjustselling prices of products.
In addition to traditional export markets, the company would alsoactively seek new and niche ones while recalculating production costs tonegotiate better selling prices in the future, he noted.
Vu from the Vit Viet Industry Production and Trading JSC agreed.He said that the immediate solution for his business was to accept losscompensation.
Vit Viet mainly supplied components to foreign direct investmententerprises in Vietnam which always considered and compared differentmanufacturers in terms of quality and price. So it would be easy for his firmto lose customers if it increased selling prices of products, especially whenorders were scarce, Vu said.
According to Mai Hong Hai, Chairman of Vicem Hạ Long Cement JCS,electricity price adjustment was part of the roadmap approved by theGovernment, so not only cement but many other industries that used a lot ofelectricity would encounter difficulties.
Calling it an inevitable case, Hai said, cement producers had tocurb production costs to overcome this difficult period. He added that toppriority should be given to re-organising production to save electricity andcut off other expenses.
Earlier this month, EVN said the retail price of electricity increasedby 4.5% to over 2,000 VND (8.2 US cents) per kWh starting from November 9, thesecond time they went up this year.
According to EVN, the price hike would increase household electricitybills by between 3,900 VND and 55,600 VND per month, while businesses wouldhave to pay an additional 432,000 VND per month.
Nguyen Quoc Dung, head of the business department of EVN, said theGovernment would continue to financially support those in difficultcircumstances through cash, their values being 30kWh worth of power use a month.
The latest increase would add about 3.2 trillion VND this year tooffset EVN's financial burdens, said Nguyen Dinh Phuoc, EVN's chief accountant.
The group would cut regular expenses by an additional 15% and minimisethe use of lighting equipment in all units to help solve financial problems,Phuoc said.
High input prices were a major contributor to EVN's financialloss, according to the Department of Electricity Regulatory under the Ministryof Industry and Trade (MoIT).
Vietnam’s largest power company and sole distributor had incurredover 28.7 trillion VND in losses in the first eight months of 2023. Last year,EVN also reported a loss of 26.5 trillion VND.
The company said its inability to stem the bleeding was because ithad been operating below cost as prices for raw materials and input hadincreased significantly since the beginning of the year./.
VNA
