The Russian Coal Sector 1993-2003

Over three years starting in mid-1993, the Ministry and RosUgol planned a major restructuring of the coal sector, beginning with freeing coal prices and a reduction in state subsidies. Mines were to become self-sufficient through increases in productivity as well as from higher prices for the coal that they produced. RosUgol could then sell mines to private investors and mine employees. Initially, the restructuring programme proved difficult and painful to implement. Lack of financial resources made it impossible to pay adequate support to redundant miners or to bring the necessary materials and new equipment. In addition, capital was unavailable to open efficient new mines that would take care of the energy-security needs of the country.

In 1994, in an effort to reduce the burden of the loss-making mines on the handful of profitable ones, RosUgol issued an order to close 46 mines. The number was later increased to 60. By December 1997, RosUgol comprised 27 production companies, associations, and stand-alone mines established through subsequent reorganisations, mine mergers and mine closures. RosUgol was disbanded at this time, however, under an agreement between the Russian Government and the World Bank.

At the beginning of 1999, the government established the Committee for the Coal Industry under the Ministry of Energy, responsible for state management of the coal sector. By 2000, 140 mines had been liquidated. Most of the mine closures and reductions in inefficient capacity occurred in 1998-1999. In 1999 alone, 90 companies accounting for about 62.4 Mt of capacity were closed. That left some 220 coal-producing companies with 106 open- pit and 114 underground mines. By the beginning of 2000, 87% of all loss making coal mines in Russia had been liquidated or were in the process of liquidation and a further 25 were closed by 2003.

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