Government • 11 August, 2018

New Heating Season: About Preparations to Timely Provide Population with Coal

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In autumn 2018 the turmoil around providing the population with coal for domestic needs took place in the country. Because of the fuel shortage, coal prices soared. It took considerable effort to rectify the situation, which even became out of the agenda subject of discussion at a Government meeting chaired by Prime Minister Bakytzhan Sagintayev, reports primeminister.kz.

What is the state of affairs in this regard today? Have conclusions been drawn from the last year’s lessons, what was done not to allow recurring of the situation? For answers to these and other questions, PrimeMinister.kz correspondents appealed to the ministries for Investments and Development, Energy, National Economy, and the capital’s akimat.

Results of Taken Measures

Created in the capital and regions, the rush around coal, which led to a sharp jump in prices, became the subject of serious proceedings of the antimonopoly body.

According to the Committee on Regulation of Natural Monopolies of the Ministry of National Economy, 21 violations of competition protection legislation were found in three coal mining companies and 96 wholesale and retail suppliers on the shortage and increase in coal prices in the heating season 2017/2018.

To date, 20 investigations have been completed, of which 12 cases confirmed violations of 50 subjects:

Investigation into the coal producer of JSC "Karazhyra," which coordinated the economic activities of five wholesale intermediaries in the coal market in the East Kazakhstan region.

Eleven investigations into 49 subjects of wholesale and retail coal suppliers suspected of cartels or coordinated actions to raise prices in ten regions (in Astana, Aktobe, Akmola, Almaty, East Kazakhstan region, Zhambyl, West Kazakhstan, Karaganda, North Kazakhstan and Turkestan regions).

The total amount of the administrative fine, including monopoly income, was 299 million tenge, of which 47.4 million tenge have been paid. Administrative cases with the rest of the fine are under consideration in the courts.

At the final stage, there is one investigation into four wholesale suppliers in Kostanay region regarding the conclusion of the cartel at the auction, the Committee informs.

Extraction — More than Last Year's

According to the information of the Ministry of Energy, coal mining enterprises, according to operational data, produced 60 million tons of coal in seven months of the year, which is 103.9% against the same period of last year (59.7 million tons).

Power plants shipped 32.4 million tons of coal, which is 102.5% compared to the same period last year (31.6 million tons). For public utilities and the population, 5.44 million tons of coal were shipped — 100% by the same period of 2017 (5.3 million tons). As noted in the department, for this period 15.5 million tons were exported.

The Ministry of Energy recognizes that in the past heating season there have been interruptions in the supply of coal for the population.

"This is due to two main factors: unavailability on the part of local executive bodies and uncoordinated actions by unscrupulous coal suppliers," the Ministry of Energy stresses.

Ministry for Investments and Development: 643.3 Thousand Tons More Coal Transported

The transport plays an important role in the timely delivery of coal. You can get enough coal, but it's important to deliver it to the consumer on time. Investments Ministry notes that August 1, on the balance of Kazakhstani operators is about 54,000 gondola cars. Since the beginning of the heating season, for the three months and eight days in August, 16,953,600 tons of coal were transported, which is more by 643,300 tons compared to the same period last year.

The selling price of coal from the cut is insignificant. Its growth for the final consumer is significantly affected by railway tariffs and "surcharges" of intermediary organizations (resellers). The bulk of coal for domestic consumers is sold through the commodity exchange. As noted in the department, coal pricing, trade regulation and exclusion of intermediary structures are not within the competence of the Ministry for Investments and Development. Regulation of trade activities, state regulation of commodity exchanges, regional development and antimonopoly regulation to market entities are in the competence of the ministry.

However, according to the Code on Subsoil and Subsoil Use, state policy in the coal sector is transferred to the Ministry for Investment and Development. What has changed in connection with this?

According to the ministry’s experts, the world trends in the transition to a green economy affect the consumption of coal. The increase in the export of Kazakh coal will be uncompetitive due to the relatively low quality and high transportation costs. Due to high ash content and relatively low calorific value, Kazakh coal can be sold in export markets only with a significant discount (30-50%). Of the large deposits, the exception is Shubarkol, where coal generally meets export standards.

In this regard, taking into account world trends, it is necessary to develop coal chemistry and complex deep processing of coal. This direction can provide a qualitative change in the consumer properties of products and, accordingly, increase its market price, and most importantly – will allow to go beyond the market of thermal coal. Considering the foregoing, the ministry intends to continue the state policy on further development of the coal industry in Kazakhstan.

In the future, of course, there are different options for replacing coal. For example, natural or liquefied gas. Moreover, the construction of the main gas pipeline from the southern regions to the central and the capital, within the framework of the implementation of the Five Social Initiatives of the Head of State, has already begun. But this is the topic of another conversation. How are they preparing for the heating season in terms of providing the population with coal in the Astana akimat?

Akimat Counciil: Store Coal Now

The Capital's Akimat also has positive expectations of the new heating season. As noted in the akimat's information, coal consumption for the autumn-winter period of 2017/2018 was 2945,300 tons (of which 2545,300 tons are energy sources, 400,000 tons for the population's needs). From May to August 6, 2017, for the needs of the population in Astana, 28,800 tons were delivered, for the same period in 2018 35,300 tons were already delivered, which is by 22.6% more.

From July 27 to August 3, the capital received 42 cars or 2932 tons of coal:

23 cars or 1,610 tons of Shubarkul;

10 wagons or 694 tons of Maikuba;

9 cars or 628 tons of Karazhyra;

Prices for coal:

Shubarkul – 14,500 tenge / t

Maykuba – 10,000 tenge / t

Karazhira – 14,000 tenge / ton.

Today in Astana there are seven main sellers of coal products. The total coal reserve as of August 7 is 9,590 tons. At the same time, the local executive body emphasizes that all social facilities are heated by diesel fuel.

As for last year's situation, so far there is no turmoils. The Roadmap for the Purchase of Coal Products was approved. According to the map, the akimat started work on agitation of the population through the i-Kemek service, chat bots, media, site and social networks of the Astana akimat about the need to purchase coal from August 2018.

Daily monitoring is carried out on the quantity of coal supplied, as well as price monitoring. In the event of an overestimation of prices, data are sent to the Department of the Agency for Regulation of Natural Monopolies and the State Revenue Department for Astana for taking appropriate measures.

Akimat of Astana urges residents of the city to start buying coal products right now.

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