NDRC jumps into standoff between coal producers and power plants

09:10, August 13, 2010      

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The National Development and Reform Commission (NDRC) said in a statement Wednesday that it is cracking down on coal producers that do not honor their contracts in a move to keep energy prices low around the country.

Coal producers sign contracts with power plants every year, but as soon as the contract price drops below market price, the miners bail. The NDRC is supposed to enforce these contracts, but for years has been unable to.

The coal miners have the incentive to default now because the coal price is rising, according to Lin Boqiang, the director of energy research with Xiamen University.

But the NDRC has ways to force coal producers to follow their contracts. Those who refuse to accept the NDRC's decision might lose their share of railway transportation, Lin said.

Rail is the most important way to move coal within China. The country's coal reserves lie largely in the north, northwest and southwest. However, major coal consuming centers are in the east and south, which makes the long-distance transportation between coal producers in the hinterlands and major users in the coastal areas a vital issue for the coal industry.

Coal miners are also given specific transportation quotas that restrict the amount of coal they can transport. The NDRC will now readjust the quotas to force reluctant coal producers into honoring their contracts.

In 2009 China's coal output was booked at 2.96 billion tons, or more than 40 percent of the world's total. Coal makes up about half of China's power generation. Coal-fired power generators have been calling for the NDRC to deregulate electricity price citing losses due to coal price increases.

The NDRC said it would publicize the coal producers' implementation of the contracts and punish defaulters in cooperation with railway department.

Source: Global Times


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