Recently, the Vietnam National Coal and Minerals Industries Holding Corporation (Vinacomin) has proposed increasing the price of coal sold for electricity generation. Although the price of coal for electricity generation has been adjusted several times, it is still very low, at approximately 71 to 73 percent of the audited production costs in 2011. Compared with 2013, the price of coal for electricity currently is about 63 percent to 66 percent of cost. At present, there has not been a countervailing financial source for the price of the coal.
Mr Nguyen Van Bien, Deputy General Director of Vinacomin, said: "As the estimated sale of coal for electricity generation in 2013, total value of coal sold for electricity generation in 2013 are about VND6 trillion lower than actual value in market."
In 2012, a decline of market consumption causing a decreasing price of coal export and price of coal for electricity lower than production cost has resulted in a reduction of productivity and resources. This poses challenges to coal production in 2013.
Besides the price of coal sold to the electricity sector, the price of coal sold after 10 percent deductible export tax and non-deductible VAT for inputs to other big sectors such as fertilizer, chemicals, paper, cement, steel for domestic and export consumption is only enough to offset the price for production stabilization, guarantee employment for workers and make profit, but not significantly. Moreover, the wages of most employees except miners in 2012 decreased by 8 percent compared to 2011 (individual miners keep wages stable). If the price of coal for electricity generation not quickly adjusted, it will heavily affect financial ability and cause long-term impacts on the coal industry due to lack of investment capital for mine development.
Vinacomin's capital accumulated before 2011 was relatively stable due to high revenue from coal exports, but now coal is sold lower than the actual price and the revenue of coal export after tax just covers the costs, accordingly. Therefore, the ability to increase production to meet demands on coal after 2015 is difficult.
According to Mr Nguyen Van Bien, the price of coal previously was lower than actual value, but the proportion of coal sold for electricity generation accounted for 10-15 percent of the total, not that significant; however, coal sold for electricity generation in 2013 is accounting for over 30 percent of total output and rising; in the first quarter of 2013, the coal for electricity accounts for over 50 percent of domestic consumption. More importantly, while coal exports and coal price before 2011 had been high enough to compensate with the domestic coal price, the global economic downturn caused a sharp decline of coal exports (decreased by 30 percent compared to the end of 2011).
After Vinacomin's proposal for a price increase, economists expressed concerned that this will result in an increasing price of electricity and essential commodities. Dr Le Dang Doanh said: "Limiting coal price helps to prevent an increase of electricity price, because increase in coal price always provides an excuse for an increase in electricity price".
The economist Pham Chi Lan supported that the price of some of mining industries must be considered and adjusted. However, she also stressed that the price increase must meet some criteria: No waste of resources. No monopoly. Price range carefully planned to offset actual business costs.
The first quarter of 2013, the amount of raw coal produced reached 11.7 million tons or 25 percent of the annual target, and coal consumption reached 10.7 million tonnes or 25 percent of the annual target. Mineral reached 24 percent of targeted set (in which Alumina has produced approximately 30 thousand tonnes); electricity generation reached 31 percent; manufacturing - supply of explosives reached 27 percent. Vinacomin's revenue in the 1st quarter of 2013 reached VND24 trillion, equal to 23 percent of the targeted set. This reflects a great effort by the whole industry, but Vinacomin's financial balance still remains difficult; the profit was not significant and the workers' wages fell by 8 percent compared to 2011.
Huong Ly
Vietnamese
