Miners think otherwise

The results are anything but cheerful. According to the ministry, coal production during the first two months of 2003 declined by 11% from the same period of last year, with the extraction of coal for power plants down 9%. Blame, however, has been laid. According to the report by ministry State Secretary Volodymyr Lushkin, Enerhoatom, the national nuclear energy company, is at fault for the shortfall, since thermal power stations had to burn 1.3 million tons of coal to prevent power outages while some nuclear power units idled. However, nobody recalled the fact that nuclear power plants overfulfilled their production plans both last year and in the first two months of 2003. Last year, out of the 165 coal mines merely 20 made a profit (UAH 300 million), while the rest lost a total of UAH 1.7 billion, Minister Serhiy Yermilov told the collegium.

If urgent measures are not taken, forecasts suggest that coal production could fall dramatically in Ukraine. At the current rate, production will shrink by 30% in 2005-2006. To quote Yermilov, this in fact means a gradual transition to a stage of irreversible disintegration of the industry. The minister proposes reforms. This, of course, raises no objections neither in the collegium nor among miners. However, there is no general agreement among the coal barons on how reforms should be carried out. And the minister is surprised at the persistent recommendations “of certain well-wishers not to hurry reforms and consider and study everything once again.” “What is there to study?” the minister asked incredulously, speaking before the collegium. He also spoke for a financial reorganization of the economy, state protectionism, and adapting organizational forms to economic conditions at enterprises and market criteria. A characteristic expression of Mr. Yermilov was: “We see no alternatives, but we don’t get other proposals either.” (www.mpe.energy.gov.ua).

A week earlier, while the Fuel and Energy Minister was explaining to lawmakers the essence of reforms in the coal mining sector (to create powerful autonomous coal companies to begin vertical integration, ensure effective cost management, and the accumulation of resources), parliamentary Coal Industry Committee Chairman Andriy Kliuyev turned attention to the unsolved problem of enterprise debts. In his view, early this year their accounts receivable totaled UAH 4.2 billion against accounts payable of UAH 10.3 billion. “New companies will hardly be effective with such debts,” he stated. He further stressed that there is a need to inventory the debts and appoint officials responsible for restructuring the companies, because “the Fuel and Energy Ministry can’t do it alone.”

But the Fuel and Energy Ministry is quite confident, which would be even good, if the welfare of hundreds of thousands people were not at stake. Thus, quick decisions in this case could have adverse results. Nonetheless, Mr. Yermilov reported that under a Fuel and Energy Ministry decree six state-run enterprises have been created, namely, Lvivvuhillia, Volynvuhillia, Lysychanskvuhillia, Ordzhonikidzevuhillia, Chervonoarmiyskvuhillia, and Artemvuhillia. Their charters have been endorsed and their property inventoried. One of the recognized experts and former Minister Serhiy Tulub told The Day, “This is a step backward, not forward.”

The reform spirit of the Fuel and Energy Ministry amazes the country leadership. President Kuchma, in particular, said that before reforming the industry one should find sources of funding: “It is time to stop talking about reforms and first put things in order. Where can we possibly move when the problem of pay and debt arrears is still unsolved?” He opposed the idea of mechanical unification of companies in mine holdings, stressing that decisions relating to the coal sector are the prerogative of the Cabinet of Ministers. He further stated that such decisions cannot be solved by the ministries alone, since they involve large scale economics and even politics.

His words were confirmed at the recent collegium of the Fuel and Energy Ministry. According to the ministry web site, “The collegium held a constructive discussion of the reports.” Thus, Mykola Surhai, former minister and veteran of the coal sector and now director of a leading mining institute, sided with trade unions and mine managers who spoke against ministerial reforms. “Any undertaking must be well-prepared,” he said, explaining the miners’ disagreement. In his view, there is “nothing new” in the proposed reforms. What is being discussed now was prepared by his expert group upon the instruction of the then Minister Serhiy Tulub and the relevant government decrees had been issued. “What are you making up here, what are you inventing, guys?” the veteran asked the collegium members. “This is a decree that has the effect of a law. It hasn’t been annulled.” It will be recalled that the decree was signed by the current president who was then prime minister.

People’s Deputy and coal miners trade union leader Mykhailo Volynets, who also supports changes in the coal mining sector, at the same time stressed that “we do not understand the essence of reforms proclaimed by the Fuel and Energy Ministry.” According to him, most of those present also did not understand how these reforms should be carried out. “Are there any estimates at hand? What sources of funding will be used? How long will it take to implement reforms and whose responsibility is it?” the deputy asked after listening to ministerial reports and stressed, “These questions remain unanswered.” He also reproached top ministry officials for not informing the collegium about the 45 miners of the Krepinska Coal Mine, Luhansk oblast, who have refused to leave the mine unless they get their pay, as well as about miners on a hunger strike at a number of coal mines. Mr. Volynets then named the structures that have monopolized cash flows in the Donbas and will probably stand to gain from the proposed reforms in the coal sector. He called on them to leave the shadows, legalize their capital, and explained that the future of coal mines and mining towns depends on this. He further called on the Fuel and Energy Ministry not to ignore other departments (like the Finance and Economy Ministries) when making decisions, as well as the government, parliament, local authorities, and trade unions. If the ministry does not heed these recommendations any reforms will be doomed to failure, Mr. Volynets predicted.

Verkhovna Rada Coal Mining Industry Committee Chairman Kliuyev said at the conclusion of the discussion, “We must understand what we will get as a result of these reforms. At worst, we should do no harm.”