HA NOI (VNS)— The Ministry of Finance Ministry is hoping to re-ignite the ailing coal industry with plans to slash export tax on the fuel.
|Coal is mined by the Deo Nai Coal Co. The finance ministry is hoping to re-ignite the ailing coal industry with plans to slash export taxes on the fuel from 20 to 10 per cent. — VNA/VNS Photo Nguyen Dan
The proposal, submitted to Prime Minister Nguyen Tan Dung on Monday, suggests halving the export tax on coal in a bid to entice foreign investors.
The innovative idea aims to boost business for the struggling Viet Nam Coal and Mineral Industries Group (Vinacomin) and would see coal tax drop from 20 to just 10 per cent.
According to the ministry, Vinacomin sold 21.8 million tonnes of coal in the first seven months of the year, just 48 per cent of its target.
By the end of July, the group's inventory was 9 million tonnes due to a sharp decrease of both domestic consumption and exports.
The ministry said the current export tax of 20 per cent has forced prices higher than the threshold at which Vinacomin can feasibly export coal.
The ministry calculated that reducing the export tax on coal by 10 per cent would enable Vinacomin to sell an additional 6.5 million tonnes.
The benefits of the tax cut would be numerous.
It would help the group increase export volumes, reduce inventories and maintain production levels, safeguarding around 110,000 jobs in the mining industry.
In addition, the State budget collection would also be increased while Vinacomin would be able to balance its financial resources to invest in coal production.
The ministry added that the tax would be increased as the world market recovers.
The move follows the example of rival coal producing countries, many of whom have reduced taxes to increase exports.
Indonesia and Australia currently have no export tax, while others - China 10 per cent, Mongolia 7 per cent and Russia 5 per cent - remain low.
On the same day, deputy head of the Ministry of Industry and Trade's General Department of Energy Nguyen Khac Tho said that the move was important as the Government has forecast the coal industry based on export plans. This year, its export quota was 14.5 million tonnes.
Speaking at a meeting to review the first eight months of the year, Tho said: "The tax cut is necessary to reduce inventory while meeting yearly capital demand of VND40 trillion (US$1.9 billion) for the sector to increase coal production to 55 million by 2012."
He added that the ministry, in co-operation with the finance ministry, have resolved to increase the price of coal sold to Electricity of Viet Nam (EVN) for power production, ensuring Vinacomin has a sufficient profit margin for investments and the expansion of coal mines.
The selling prices of energy was actually lower than production costs, which was caused the PM to approve the plans.
The current electricity price is 5.6 cent per kW while production cost is almost double at 9.6 cent per kW.
He added that if there was no increase of the coal price for EVN, households would not save energy. — VNS