Officials say more than $300 million will be spent on tax cuts to reduce electricity and petrol prices in Cambodia

Photo by: Heng Chivoan

Officials say Cambodia's electricity costs will fall as new capacity comes online.

THE government says it will spend more that US$300 million per year to keep electricity and petrol prices down, Minister of Finance Keat Chhon told the Post.

"We will continue to support prices until oil drops below US$900 a tonne," he said last week.

Imported oil costs $960 a tonne, down from $1,200 a tonne in early 2008.

The government does not provide cash subsidies for energy, but has said it will not raise taxes on imported oil, which remain at $309 a tonne, despite fluctuations in world oil prices.

The move, it says, costs hundreds of millions of dollars in lost tax revenue.

But it is necessary to combat some of the highest utility costs in the region, which are a major obstacle to attracting foreign investment.

Sam Rainsy Party lawmaker Son Chhay, however, said the government needs to first address corruption in the state-owned energy giant, Electricite du Cambodge (EdC).

"The EdC is charging $0.19 per kWh at present - the company cannot lose," he said.

"We think that the EdC should not be selling electricity for more than $0.07 per kWh."

He also accused the EdC of improperly using government funds.  

"The government should investigate the EdC ... and make sure that [government] support is used for the right purposes," Son Chhay said

Keo Rottanak, director general of EdC, told the Post on Sunday the EdC has maintained its electricity prices at $0.09 to $0.19  per kWh.

"We do not know if we should lower the electricity price or not. We are still waiting for a decision from the government," Keo Rottanak said.

Ith Praing, Secretary of State of the Ministry of Industry, Mines and Energy, did not respond to requests for comments on the issue.

But Victor Zona, deputy general manager of the Industry Ministry, said Cambodia is likely to cut electricity costs by 10 percent in Phnom Penh and about 50 percent in provinces after 2012.

He said the reductions would hinge on major hydro-electric projects coming online. They include the Kamchay dam in Kampot province, the Kirirom 3 dam in Koh Kong and the Atai dam in Pursat.

Zona said the Kamchay dam would be complete in 2010 and would produce 190 MW of electricity.

Kirirom 3 would have 18 MW of capacity and  is expected to be finished in 2011. Atai, producing 120 MW, will be online  by 2012.

Son Chhay, however, doubted that electricity costs would fall by 2012. "I do not believe that in 2012 we will receive a lower price of electricity."