According to Mr Hai, it is difficult to apply the cumulative electricity price mechanism to the highland regions although investment in power projects there is much higher than in the lowlands.

However, he said the Government has asked power companies to apply these calculations in the next six months after the new price rates take effect on March 1. It has also asked local power companies to restructure themselves to reduce managerial costs.

“The power sector’s goal is to ensure a sufficient and stable supply of electricity, and the free market and competition are the only possible means to achieve this goal,” said Mr Hai.

The deputy PM said that establishing a competitive power market in Vietnam depends on the enterprise sector.

“A fully competitive power market is expected to take shape by 2024 as soon as the required financial and organisational conditions are met. In many countries, the power sector has been privatised rapidly, but then no one takes ultimate responsibility for ensuring the power supply.”

At the press briefing, the two deputy Ministers of Finance, and Industry and Trade, confirmed that the PM’s decision will encourage businesses and people to use power properly and help increase economic efficiency.

Deputy Minister of Finance Do Huu Hao, said, “Businesses can cut power usage by 8-30 percent by rearranging production lines to be more efficient without acquiring new technology. Those that consume high volumes of power such as the water supply and steel sectors are expected to increase production costs by 2-3 percent.”

Deputy PM Hai confirmed that the new electricity price rates do not contradict the Government’s existing management policy. The Ministry of Finance will keep a close watch on any market fluctuations and it will seriously deal with those making use of loopholes to corner the market.

He said that the Government, the Ministry of Finance and the Ministry of Industry and Trade have taken into account the difficulties facing Vietnam this year before arriving at this decision.

Deputy minister of finance Tran Van Hieu said that with an average increase of 8.92 percent, the new rates will not much affect businesses and other consumers.

“Market management and tax agencies will increase inspections to ensure that no businesses capitalise on the new rates to raise the prices of their products,” said Mr Hieu.

He went on to say that the Government’s measures to stimulate the economy have begun to take effect and the new rates for electricity will not have a big impact on the national economy.

He also asked the power sector to improve the quality of its services for the benefit of consumers.