Beijing will step up efforts to shut down obsolete plants in nine sectors as it vowed to increase penalties for regions that fail to meet targets while supporting underdeveloped regions. Speeding up the shutdown and revamp of outmoded, inefficient and pollution-prone plants is intended to improve the quality of economic growth and cope with falling demand resulting from the financial crisis, the State Council said in a statement. It would also protect the environment, the Council said. After a meeting chaired by Premier Wen Jiabao on Wednesday, the cabinet set targets for phasing out obsolete facilities for the power, coal, coke, ferro-alloy, calcium carbide, steel, non-ferrous metals, construction materials and textile sectors. It did not provide the targets. Although significant progress had been made, some key industries still suffered from outdated capacity, it said, adding that local governments should not provide land for new projects using obsolete technology. Higher energy prices would also be charged on such projects to reduce their viability. The State Council also said it would suspend granting environmental impact assessment approvals to projects in regions that failed to meet obsolete capacity eradication targets plan set by Beijing. For corporates that could not meet deadlines to shut down out-dated plants, their pollution emission permits, production permits, safety permits and even business licences could be revoked, it said. But the central government will provide financial assistance to less developed regions and those that perform well in eliminating outdated production capacities. The statement came days after Beijing asked banks to keep more funds in reserve instead of lending it, especially to the overheating real estate sector. Although some sectors surpassed Beijing's targets to shut down outmoded and inefficient capacities, they still suffer from overcapacity levels that threaten profitability. For example, Beijing has set a target for the electricity industry to cut 50,000 megawatts of old plants between 2006 and this year. Between 2006 and last year, some 60,060 MW has already been closed. Even so, a power plant investment boom in the past few years saw a major surge in new capacity while interest and depreciation costs squeezed the entire sector's profit margins. The steel sector shut down 16.9 million tonnes of outdated capacity last year alone, or 31 per cent of the 2006-10 target set by Beijing. Still, the National Development and Reform Commission estimated that the industry capacity reached 700 million tonnes last year. With output estimated to be around 570 million tonnes last year, roughly one-sixth of the capacity was idle. Industry woes The steel industry continues to suffer from outdated capacity Against a capacity of 700 million tonnes, the sector's output last year was, in tonnes: 570m
