Privatising coal mines blamed for shortages

PUBLISHED : Tuesday, 12 January, 2010, 12:00am
UPDATED : Tuesday, 12 January, 2010, 12:00am

The controversial drive to privatise coal mines in Shanxi province is one of the culprits behind this winter's electricity shortages, a mainland newspaper reported yesterday.

The provinces of Henan, Hubei, Hunan, Jiangxi and Sichuan and the municipality of Chongqing were placed under rationed electricity supply last week.

However, when rationing was required even in Taiyuan, the capital of coal basket Shanxi, serious questions were raised about the electricity and coal industries.

According to the official Guangzhou Daily, the two biggest power plants in Taiyuan have stockpiles that are one-fifth of the normal level, and enough for just two days of electricity generation.

An official at Taiyuan No 2 Power Plant was quoted as saying that 'in the past two weeks, all operations managers are out in Datong [in Shanxi], Inner Mongolia and Yangquan [also in Shanxi] trying desperately to buy coal and transport coal back here'.

The article suggested the main reason for the shortage is the restructuring pushed forward by Shanxi's government last year. It means the majority of the province's coal mines are idle. In areas administered by Taiyuan, for example, just two or three out of 70 are in operation.

Under the restructuring, small mines have been shut, and privately owned mines must merge with state-owned companies in a bid to improve work safety. By the time the reform is completed, the number of mines will drop from 2,600 to 1,053.

The reform has been criticised for being ill-considered and an infringement on private ownership rights. So far Beijing has stayed out of the fray, but economist Hu Xingdou said the time has come for it to step in.

'Coal is the buttress of the country's economy,' Hu said. 'It doesn't only belong to Shanxi, and any coal policy should not be decided by Shanxi alone.

'The central government, especially the National Development and Reform Commission, should step in and take charge of ensuring there's enough coal supply for electricity.'

A CCTV programme and other mainland experts this week said there were other reasons behind the coal shortage, which has seen prices jump 50 per cent in the past six months.

Besides distribution problems, the faster-than-expected economic rebound, the cold winter increasing demand for fuel and a shortage of hydroelectric power from droughts have all been blamed for aggravating the situation.

But researcher Li Chaolin of the coal industry magazine Energy told CCTV-2's Economic 30 Minutes last Thursday that many coal-producing areas were still using controlled production to keep prices high. He said the market should determine prices.

One senior mainland-based industry analyst who refused to give his name said Shanxi province - the supplier of more than one-third of the country's commercial coal up until last year - has a huge monopoly.

'The restructuring is only another way for the existing stakeholders to wield greater control over coal prices,' the analyst said.

'The coal industry has been giving out chaotic figures for a long time, which probably have misled the central government as well. Otherwise, I don't understand why the central government has not done anything yet.'