Today no coal mine in Donetsk oblast is implementing the regional program to develop mining operations, which is critical to the successful operations of mines. The region has seen a significant reduction in mine throughput, which automatically entails a reduction in output volumes, say experts. Reductions can eventually lead to the closure of a number of coal enterprises in the Donbas. Members of a special taskforce at the Donetsk Oblast State Administration, appointed to study the situation in the region’s mines, have drawn equally pessimistic conclusions, the main one being that a major crisis in the coal mining sector is looming.
Today a large number of famous mines in the Donbas, even once successful ones, are on the verge of folding. The Trudovskaya mine in Donetsk is finishing the last of the two longwall faces that were active at the beginning of the year, after which there will be no way to produce coal. This may result in its forced liquidation, because no new longwall faces are ready. Many other enterprises are in a similar situation. Right now 22 mines have only one active longwall face each, while no other faces are being prepared. According to the oblast administration, the reason behind this is insufficient government funding. Many mines in Donetsk oblast have obsolete mining, mechanical, and electrical equipment, and are considered dying mines. Major funding is needed to revive them. Moreover, operational mines are suffering because of the forced shutdowns of other mines. Their earnings are channeled to underperforming mines that cannot support themselves. As a result, there is not enough funding to revive dying mines or modernize functioning enterprises.
“Nearly one-third of all budget funding for the mining sector literally gets buried in the sand,” says deputy governor of Donetsk Oleksandr Klymenko, who oversees the coal sector. This creates a vicious circle: while it is costly to support a dead mine, it is even more expensive to close it. As a rule, the process of completing all the procedures necessary to liquidate a mine is stretched out indefinitely (from two to three years), during which time the dead mine consumes huge resources that could otherwise be used to support normally functioning enterprises.
According to Anatoliy Vovchenko, chief of the Coal Industry Department at the Donetsk Oblast Administration, today it simply makes no sense to conduct a lot of procedures: with the help of special programs these procedures could be extended over time and implemented gradually. The money earmarked for such procedures could be used to build mine water pumps, a much more pressing problem today. Many mines have large coal deposits, but they are flooded and cannot be reached. This problem could be resolved by building water pumps. This is the task of the Ministry of the Coal Industry. Experts believe that by creating a separate program for these procedures, the industry could save several million hryvnias every year. For example, the liquidation of 35 dying mines in the Donbas requires UAH 176 million, 39 million of which will be spent on landscaping the mine premises, and another UAH 70 million on the conversion of slag heaps. By extending these activities over time, this money could be put to effective use elsewhere even now.
As one of the ways out of this crisis, experts propose liquidating associations that are forced to keep dying mines afloat. Thus, normally functioning enterprises would reclaim the rights of legal entities, which would also enable them to obtain loans. Klymenko says this could save a lot of mines. According to his estimates, the oblast needs to attract close to 38 hryvnias of investment per ton of extracted coal. Additional funding would enable the Ternopilska mine alone to increase its output to 300,000 tons per year. To normalize and optimize payments for coal, Donetsk oblast coal industry representatives also propose developing a system of direct contracts among mine administrations, local government bodies, and power plants.
These measures would make it possible to avoid a host of problems, the major one being wage arrears. Back wages in the industry have already reached UAH 180 million. Twenty-three coal miners at Karbon mine No. 20 in the town of Shakhtarsk have refused to leave their mine for over two weeks, demanding their wages for August-October 2005.
However, while the striking miners are refusing to leave the mine, administrations of coal enterprises have a hard time hiring new miners. Klymenko attributes this to the fact that almost every mine can be shut down at any moment because of the lack of longwall faces, forcing people out on the street. Moreover, miners do not have any motivation to work because of the lack of normal working conditions and occupational safety provisions, since mining equipment is almost never modernized.
Based on its study, the taskforce has suggested proclaiming 2006 as a year of intensive development of the mining industry to sharply increase the volume of mining operations. The taskforce believes that making this happen requires supplying mines fully with needed resources. Coal industry experts want to single out the most promising coal mines in the region and give them maximum support. They have also asked the ministry to develop a general structure for managing the coal sector and impose a moratorium on any changes for the next 5 to 10 years. The experts are calling for a public discussion of the problems in the Donbas. Otherwise, the money allocated for the region will continue to be used without the desired effect.
