“Adopting the market economy without following its principles makes no sense”

S.Altankhuyag, chief of the coal research department at the Mineral Resource Authority of Mongolia, says prices have to be decontrolled if the mines are to survive and if supply to power plants are not to be interrupted.

When will some progress be seen  in formulating a coal policy, given the numerous pressing issues in the sector? 
Let us go back a little. When the Ministries were restructured in 2009, the Mineral Resources and Petroleum Authority were split and they became two independent implementing agencies of the Government. Along with this, a new department of coal research was set up.

The mining sector has become the foundation Mongolia’s economic development and the production of coal is a major component of the sector. It is also developing rapidly. Thus it was decided that  coal companies and the administration would meet quarterly to exchange views and information, and to resolve problems, if any. The first meeting was held last September and the second in January. At both, pressing issues regarding coal and the ways to solve them were discussed directly. Once some decisions are taken, the next step is to monitor if their implementation is actually improving the situation. We check the situation in the companies to find this out. The interaction has been effective and the coal industry is enthusiastic about the meetings.

While the coal sector has been developing rapidly, there has been no integrated and long-term state policy on it. A program was submitted to the Government and Parliament at the end of 2006, but this has never been put into practice. Our meeting in September also felt the need for a clear state policy and agreed to work on a medium- and long-term policy paper. MPs Kh.Badamsuren and Shinebayar, who know the coal and mining sectors well, supported the proposal and work began on a new coal program. A draft called Mongol Coal was submitted to the Ministry of Mineral Resources and Energy and to MPs. This now being considered by a working group in Parliament and we hope that it will be approved at the Spring session.

How is Mongol Coal different from the 2006 program?  
This is a program that will be implemented in two stages. The first will cover 2010-2015 and the second 2016-2025 respectively. Thus it can be approached with both a short-term and a long-term perspective. The main difference from and improvement on the earlier program is that the state policy will have five functions.

First, the state will directly support economic capacity building and financial sustainability of coal mining companies and entities.  There is a perennial debt relationship between mines, the energy sector and the end users. We have to shift to principles of the market economy to resolve this once and for all. The program suggests several measures that will achieve this.

Second, coal export is growing fast, increasing 70% in 2009 from the previous year. Extraction went up 40% in this period. Both will go up substantially this year. This has to be managed well.

Third is processing the coal. The program sets out guidelines to restrict the use of raw coal in both local energy consumption and for exports. All extracted coal should be processed and be value-added in keeping with world market standards. We plan to turn coal into an ecological fuel for domestic consumption. This is an ambitious goal. Now both processing and exporting coal are new in Mongolia and we do not have enough trained professionals in either field. The program also calls for local professional training.

Please subscribe to our journal to read more.