Tyvan Coal is not Bargaining Chip

Tyvan Coal is not Bargaining Chip

Photo: https://fedpress.ru/

The leadership of the Tyva Republic has raised claims against Kaa-Khem, the largest colliery in the region. The industrial companies are now obliged to sell the coal at a practically fixed price which is no more than 2,200 roubles ($30.23) per tonne.

Tyva’s social stability depends on the cost of fuel. Most of the population lives in rural areas. The Kaa-Khem coal mine, which has been in operation since the early 1970s, is the main supplier in the area. It was previously owned by the Federal Agency for State Property Management (Rosimushchestvo.) It went bankrupt 15 years ago and came under the control of the Tyva Mining Company (TGRK), which, in turn, is run by Oleg Deripaska's organisations through offshore companies. After that, the price of coal in Tyva began to gradually rise. According to the latest figures, a tonne of fuel together with the cost of its delivery is about 7,000-8,000 rubles (circa $103.05) for the remote Mongun-Taiga District. This is a lot of money for a subsidised republic with a high unemployment rate. It is impossible to economise as 50-degree frosts are of common occurrence in Tyva. Previously, the republic's authorities tried to solve the issue of expensive coal with the help of subsidies. However, there was not enough budget money for all the people who needed it. The real need for subsidised coal is many times greater.

As a result, the government of the Republic of Tyva passed a decree reducing the price by almost 500 roubles ($6.87.) It came into force at the beginning of September. The document was signed after an unsuccessful attempt to negotiate with the coal-mining companies. The authorities initiated an audit of the validity of the prices.

The Tariff Service of the Republic of Tatarstan found that the companies had seriously overstated them using their monopolistic position. For example, the price of coal included indirect costs, although direct costs were also increasing, as TGRK had not economized. According to the republic’s leadership, the most outrageous thing is that the firm actively sells coal outside Tyva at lower prices and covers this discount at the expense of poorer Tuvans and local budgetary institutions, with an annual guaranteed profit of 200-230 million rubles ($3.44 mln).

Experts from the Tariff Service of the Republic of Tyva have established that the retail price of coal could be well reduced by about 25%, and TGRK will not lose a lot of money after this. However, they decided to cut prices only by 17.7% so as not to deprive coal miners of reserves for pay raises.

TGRK does not agree with the republican government's decision. The company’s management is planning to appeal to an arbitration court, although it did cut the prices. Tyva's leadership also seems to be serious about its plan.

“I have no desire to put one of the largest enterprises in the republic in a difficult situation,” said Vladislav Khovalyg, Acting Head of the Tuva Republic, “but at least a third of the republic's population is on the other side of the scale. Therefore, we will solve the problem of expensive coal for the population without delay. Moreover, we will do it with or without TGRK. I have talked about this with the President and the federal ministers, and they support it. The decision options are all within the law. They only differ in terms of time, efforts, and resources you have to spend on them.”

An immediate problem is how to control the dealers who can now buy large quantities of coal at the mine at the new price and sell it to residents at whatever price they say. The authorities are planning to carry out regular inspections to fight against such profiteers from next week.

“Our current task is to make sure that the buyer will get the new price plus transport costs that are also regulated by the government. Warehousing has not changed in the price either. In other words, the resellers only have to subtract 467 rubles ($6.42) from the old price,” First Deputy Prime Minister of the Tyva Republic Alexander Brokert said, commenting on the scheme.

Meanwhile, Tyva also elected the Head of the republic on 19 September. For Vladislav Khovalyg, bringing down coal prices is a great stepping stone to success which is likely to boost his popularity rating.

“The federal centre's mistakes have led to the current results in Tyva’s development. We are not given the main thing which is a clear plan and strategy for decent development of the republic. Today, making the regional and municipal authorities solely responsible for the development of the region is a utopian idea. They can provide help and assistance but we need strong federal support. Right now, the republic's acting head is gradually identifying problems and shortcomings. He is fixing what is possible to fix. The most significant thing that has been achieved is, of course, the reduction in the price of electricity and coal. This means that he has stepped on the interests of oligarchs and others interested in illicit profits. The new governor will need a strong team to change the course of the republic’s development and halt the outflow of investment,” Viktor Tunev, a former Mayor of Kyzyl and now head of a wild-growing herbs processing company, said in an interview with wek.ru.

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