VietNamNet Bridge – The Vietnam Coal and Mineral Group (Vinacomin) has shouted for help, asking for the export tariff reduction to zero percent, or it would die because of the sale prices lower than the production costs. However, the proposal has faced the strong opposition from the public.
Vinacoal says it incurs big debts because of… power plants
In September 2011, the coal export tariff was raised from 15 percent to 20 percent. Seven months later, Vinacomin has asked to cut the tariff to zero percent.
The coal group cited three reasons to explain its proposal. Firstly, the coal consumption has been decreasing in both the domestic and foreign markets. Secondly, the export prices have dropped sharply by 10-36 percent. And thirdly, Vinacomin now has to sell coal to power plants at the prices lower by 50-60 percent than the production costs, which means that it loses 8500 billion dong when selling coal to power generators.
Deputy General Director of VInacomin Nguyen Van Bien said if the Prime Minister accepts the group’s proposal and the zero tax rate is applied from June, the average export tariff in 2012 as a whole would be 10 percent.
Also according to Bien, Vinacomin is incurring big loss when selling coal to power plants. The more coal it sells to power plants, the bigger loss it incurs. Meanwhile, the coal sale prices are defined by competent ministries, not by Vinacoal.
It can make profit only when selling coal to paper, fertilizer and chemical plants at the market prices, and exporting coal. However, the sales to the clients have decreased significantly due to the demand decrease.
While the sales and the selling prices keep decreasing, fees and charges have all increased. The environment tax has increased to 20,000 dong per ton, while the annual environment fee has been raised from 6000 dong to 10,000 dong, which means Vinacomin has to spend 850 billion dong more in expenses.
Vinacomin stones the crowd?
The proposal of Vinacomin has surprised many people, who believe that VInacomin can enjoy many preferences already and it should not expect too much from the government.
As Vinacomin has lodged the proposal directly to the Prime Minister, the Ministry of Finance had not been informed about the request. However, experts have described Vinacomin’s proposal as “unreasonable claim.”
In principle, Vietnam does not encourage to export natural resources and raw materials. Therefore, the export tariffs have been raised step by step in the last few years. Since 2008, the coal export tariff has been raised from zero percent to 5 percent, 10 percent, 15 percent, and then to 20 percent since September 11, 2011.
In August 2011, the Ministry of Industry and Trade once proposed the Ministry of Finance to lower the coal export tariff from 15 percent to 10 percent. However, the ministry then rejected the proposal, while it even raised the export tax rate to 20 percent.
Dr Vu Dinh Anh, a well known economist, said he was so surprised about the proposal, which was made at the time when the government clearly stipulates that Vietnam does not encourage coal export. Especially, some economists have even asked to stop exporting coal.
Dr Nguyen Thanh Son, Director of the Song Hong Energy Company, has affirmed the export tariff reduction would not rescue the coal producer.
Son said that there are some main reasons behind the poor performance of Vinacomin. More than 45 percent of Vinacomin’s coal cannot meet the state’s standards. While the market needs high quality coal, Vinacomin does not have high quality coal to sell.
Son has also emphasized that it is a blunder for Vinacomin to rely on exports to grow.
Pham Huyen – Chi Hieu