The privatization of coal mines is being blocked up by the Ministry of Fuel and Energy and the state administration of Donetsk oblast, according to Oleksandr Bondar, chairman of the State Property Fund. According to him, the fuel minister and Donetsk oblast governor persistently refuse to grant approval for selling the mines at auction. Now there is a regulation of the Cabinet of Ministers instructing the Fuel and Energy Ministry to prepare the list of the mines that are to be privatized first. There is speculation in the government about the list, that is sometimes said to include 14 and sometimes nine mines. But neither journalists nor the deputies of the parliamentary Committee on the Fuel and Energy Complex have seen it on paper yet.
Oleksandr Bondar said that after certain discussion there are only four mines left out of the nine which they initially planned to privatize first. But the financial state of those four was so poor that the State Property Fund did not even risk starting the preparation for competitions. The SPF chairman believes that selling state mines must be a complex program, rather than isolated transactions. “We understand that the demand for mines between investors is low, but this does not mean we should do nothing,” said Bondar. He is convinced that privatization can be the very stimulus to a renewed production rise in the sector.
Meanwhile, Minister of Fuel and Energy Vitaly Haiduk claims he is not at all against privatization in the coal industry. According to him, there is debate only concerning the ways the mines should be sold. The ministry insists that coal companies should make an additional shares emission proposing a part of them to private investors. He gave an example of two already privatized mines in the Donbas, one of which, Chervonoarmiyska-Zakhidna, passed into private ownership after a special stock emission had been conducted. “The mine issued shares, the investor bought them, and the enterprise got money for its development,” the minister said. In his opinion, the traditional scheme of selling mines at auction is unacceptable for the sector, since the money received will go to the state budget. Whether the coal industry will ever receive it back as subsidies remains quite a question.
As for the State Property Fund, until recently it considered an additional share emission as one means of shadow privatization, and consequently it rejects the Fuel and Energy Ministry’s initiative vigorously. Mr. Bondar thinks that only open auctions can bring to the mines clean private capital that does not pursue purely speculative aims. But the question is whether that transparent capital will be willing to get its hands dirty in coal? It is well known that the Ukrainian coal industry is one of those facing the most problems. Tremendous money involved in the branch flee into the shadows. And the financial deficit this causes the state budget is compensated by a powerful political lobby. The Regions parliamentary faction comprised mainly of Donbas deputies did not vote last week for the 2003 draft state budget, because they believe the state subsidies rate for coal industry amounting to UAH 2.2 billion too low. SPF Chairman Oleksandr Bondar suggests solving the problem by means of privatization: “Let the money received from privatization of mines be added to the budget with the mines getting it back as subsidies.” They reasonably consider this option unacceptable in the Donbas aware of the fact that with the government’s anticipated financial difficulties should the money make it into the treasury, it will not likely return to the mines very soon.
As the heated discussion on the mines’ future is transformed into a public confrontation, the mines themselves are falling directly into financial precipice. Against a background of talks about auction hammers it becomes more and more difficult to hear the hammering of chisel ones. More than half of 170 Ukrainian mines are now in the stage of bankruptcy. They would have long been sold to creditors for their debts if not for the law forbidding temporarily the alienation of state property by judicial settlement (as a means of preventing shadow privatization). The State Property Fund insists that, when dealing with bankruptcy and auction privatization, the choice should be made in favor of the latter. “What is the difference between bankruptcy and privatization? Selling by auction will allow us to create conditions by which the proprietor will assume investment obligations. He will maintain the work collective and pay wages on time. And if a bankruptcy happens, one can find there is no work collective any more and no mine either,” explains Bondar.
It is not hard to understand what has been blocking mine privatization for a several years. The commodity and financial streams of coal enterprises have long been controlled by agent companies. Their lobbyists hold high offices in coal sector state departments. This is why the State Property Fund will obviously not be able to handle the mines privatization by themselves. For, in addition to everything, the process demands a new scheme of subsidies for the privatized mines. “There is no use privatizing if private mines receive the same state subsidies,” Bondar believes. Meanwhile People’s Deputy Hennady Astrov-Shumilov, who came to the parliament after having been director of coal holding Roveky Anthracite, believes privatization in the sector to be only possible with simultaneous investment to open new mines. For now over a half of the coal fields of our country have been in operation for over fifty years, as a result of which the branch is doomed to chronic unprofitability.
