SGGPO
On the afternoon of May 23, the National Assembly discussed a number of controversial contents of the Law on Prices (amended). Here, Deputy Nguyen Thien Nhan (HCMC) made a notable statement on the issue of State price regulation, especially regarding electricity prices.
The former Secretary of the Ho Chi Minh City Party Committee said that he had given his opinion on the draft Law on Prices (amended) three times and the drafting committee had accepted some of the contents. However, there was a content about the principles of state management and price regulation that the Department of Finance and Budget (Office of the National Assembly) responded that it could not accept because the state budget still had many difficulties.
Deputy Nguyen Thien Nhan analyzed in depth the proposal to add a principle for the State to manage and regulate prices. That is, the State must have public financial resources and appropriate reserves of goods when regulating prices. That is to ensure that the State's price regulation is in accordance with the law of supply and demand of goods and services, is feasible, and does not cause damage to businesses and people.
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| Delegate Nguyen Thien Nhan (HCMC). Photo: QUANG PHUC |
Citing the provision of electricity to people and businesses according to market mechanisms in countries, Deputy Nguyen Thien Nhan said that in 2022, when oil, coal and gas prices increase, causing the cost of electricity production and supply to increase, so that consumers and businesses can still use electricity at the necessary level without having to pay more for electricity than they can afford, there are two solutions.
First, like in Japan, for every 1kW of electricity consumed by a household, the government pays 7 Yen, the family has to pay the rest.
Second, as in France, electricity companies increase electricity prices when oil and gas prices increase, but the actual price will decrease by 4% in 2022 and 15% in 2023 compared to the price currently proposed by the production companies, because the French government subsidizes electricity companies with 49 billion USD from the budget.
According to the delegate, Vietnam's 2012 Price Law and the draft 2023 Price Law do not have the principle of State price regulation, which is that the State must have public financial resources or reserve goods to regulate prices. Therefore, in the case of the State regulating electricity prices in Vietnam, there is only one solution: by administrative orders, the State regulates electricity prices through the Ministry of Industry and Trade and the Government. No budget source is prepared to support EVN when they suffer losses because they are not allowed to increase electricity prices, while input prices such as oil, gas, and coal prices have increased sharply. "We regulate electricity prices by administrative orders, without spending a single penny," the delegate said.
As a result, in 2021, EVN lost 981 billion VND in electricity production and sales; in 2022, it was 36,294 billion VND and in 2023, it is expected to lose 63,620 billion VND, although from May 2023, the average electricity price increased by 3%. The total loss in electricity production for the 3 years 2021-2023 is expected to be more than 100,000 billion VND, equal to 49% of EVN's charter capital of 205,390 billion VND. If the group's income from non-electricity production and trading activities and more than 10,000 billion VND are taken into account, the total loss is reduced to more than 90,000 billion VND, equivalent to 44% of EVN's charter capital. In addition, the group owes customers 19,700 billion VND due but has no money to pay.
By 2024, if electricity prices do not increase, the total cumulative loss over 4 years is forecast to be around VND112,000-144,000 billion, which means a loss of 54-70% of EVN's charter capital. If electricity prices increase by 3% in 2024, the expected loss is VND94,000-126,000 billion, which means a loss of 46-61% of equity.
According to Deputy Nguyen Thien Nhan, if the draft Law on Prices is passed with the State's price regulation principles as drafted, in 2024, EVN with an expected loss of about 94,000 - 126,000 billion VND, losing about 46% - 60% of equity, will not be able to stop losing in 2025, and will not be able to be a strong and sustainable corporation as required by the Government.
From that analysis, the delegate proposed to add a principle of State price regulation management to the draft Law on Prices 2023, which is that the State must have public financial resources and reserve goods suitable for price regulation so that EVN, the most important state-owned enterprise in the electricity industry in 2024, will not fall into a state of near bankruptcy.
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