Ukraine's state coal mines lost a whopping Hr 7.236 billion ($891 million) in the first half of 2013, according to an energy ministry report released on July 5. This means their losses increased by 38 percent compared to the same period in 2012.
The
combined output of the industry, measured in hryvnia, shrank by 16 percent in
this period, meaning production fell by Hr 4.63 billion compared to the first
half of 2012.
One of the
main reasons for this dismal performance is because coal is being sold at a
loss. Its price is set by Vuhillya Ukrainy, a state company that sells coal
from state-owned mines, and is based on the economy ministry’s recommendations.
In the
first half of the year the average price of the coal decreased by 17.8 percent
to Hr 503.4 per ton (comparing to Hr 612.8 in January-June 2012). Meanwhile,
costs of production increased 9.8 percent to Hr 1,400 per ton, on average.
Ukraine’s
poor quality coal cannot compete at market prices, while closing down the mines
would kill off a key industry in eastern Ukraine. As a result, coal mining was subsidized to the tune of Hr 6.7 billion
from the state budget, which covered miners’ salaries and a part of energy
needs for coal production, according to the energy ministry’s report.
Originally,
the subsidy on covering industry costs
in January-May was estimated at Hr 3.1 billion, according to Party of Regions
lawmaker Viktor Turmanov, who used to head a coal mining trade union.
Nonetheless,
the state mines’ losses exceeded expectations, so in January-May the government also spent Hr 2.5 billion initially set aside for future budget periods. To cover
the coal mining needs for another half a year, on July 4 the lawmakers set
aside an additional Hr 5.5 billion from the budget.
In 2012
state support to the coal industry amounted to about Hr 14 billion, twice as
high as originally budgeted for.
Another
reason for the industry’s crisis is over-supply of coal by state mines.
“There is more
than 3.5 million tons of coal sitting in warehouses of coal enterprises at the
moment,” Turmanov said.
The head of
the Independent Trade Union of Miners of Ukraine Mykhailo Volynets says the
excess is caused by an abundance of illegal, unlicensed and uncontrolled coal
mines in eastern Ukraine.
The volume
of illegal coal hit a record 6 million tones last year, he said. That’s about
10 percent of all coal extracted in the country.
Kyiv Post
staff writer Kateryna Kapliuk can be reached at [email protected].
