Coal will be thrown to the Far East – Newspaper Kommersant No. 59 (7504) dated 04/06/2023

FAS proposes to subsidize the transportation of fuel for thermal power plants in the Far East in the same way that is now used to supply oil products to the region. RusHydro, where they have been complaining for many years about the high price of coal for Far Eastern generation and have already received compensation for losses under this article, welcomes the idea. But JSC Russian Railways fears that it will contribute to irrational logistics, when coal from one coal-producing region is delivered to another.

FAS suggested introduce subsidies for the transportation of coal and fuel oil to the Far East, by analogy with the transportation of petroleum products. As Deputy Head of the FAS Vitaly Korolev said at the Vedomosti conference, it is proposed to “use a mechanism similar to the mechanism currently used for the delivery of petroleum products, gasoline and diesel.” “From April 1, a decree came into force that provides for subsidizing transportation by 4 thousand rubles. per ton,” he clarified. “At the same time, it is obvious that it is worth subsidizing fuel oil and coal as well, and thinking in this direction in order to contain the cost of energy resources that generate electricity.” The FAS did not give additional comments, the Ministry of Finance did not respond to Kommersant’s request.

The interlocutor of Kommersant, who is familiar with the course of the discussion, clarified that it is proposed to organize subsidies either by extending the rules to fuel oil Government Decree No. 2508 (on compensation for losses of JSC Russian Railways for preferential transportation of motor fuel in the Far Eastern Federal District and part of the Siberian Federal District), or the adoption of a document for coal and fuel oil, similar to the current one Decree No. 406 (on compensation from the budget for losses of Russian Railways for preferential transportation of grain). We will only talk about the volumes supplied to the boiler houses and power plants of the Far Eastern Federal District.

Thermal power plants in the Far East sell electricity at regulated tariffs, and buy coal at free prices. According to PJSC RusHydro, which owns thermal generation in the region, only a part (half in 2022–2023) of the real purchase price is taken into account in the tariff. As a result, TPPs generate losses.

PJSC RusHydro has been striving for many years and eventually achieved the inclusion of compensation for losses from the purchase of coal in energy prices. As a result, wholesale prices for industry in the region increased one and a half times (see Fig. “Kommersant” dated March 21).

RusHydro believes that the idea proposed by the Federal Antimonopoly Service will help reduce transportation costs, the share of which in the price of coal can reach up to 70%, and fuel oil – up to 30% and, as a result, the final price of fuel.

In addition, the company explained to Kommersant that the proposed mechanism will increase the transparency of pricing and transportation of coal. At the same time, they believe that the mechanism of subsidizing the transportation of coal should be considered as compensation for the costs of coal companies to ensure the generation of the Far Eastern Federal District with fuel.

But JSC Russian Railways fears that “such a measure may contribute to irrational logistics when coal is delivered from one coal-producing region to another.”

“At the same time, such transportations are of higher priority, which means that they can push other cargoes at the Eastern range, including those for export,” the company added. In September, Alexei Shilo, Deputy General Director of Russian Railways, explained that Kuzbass increased coal supplies to RusHydro in the Far East by 66% compared to last year. Coal for the Neryungrinskaya GRES in Yakutia is transported from Kazakhstan, although supplies from nearby deposits would be cheaper, and the supply of coal for the Primorsky branch of the DGK from Buryatia is 20% cheaper than from Kuzbass.

Transportation of key cargoes to the regions of the Far Eastern District should be subsidized, Mikhail Burmistrov, head of Infoline-Analytics, is sure: now it is extremely difficult to agree on an application and send cargo to the Eastern landfill, there are unprecedented downtime, and shippers incur increased costs. In his opinion, the size of the subsidy is not as important as the fact that when transportation becomes subsidized, they receive priority at the Eastern range (moving from the fifth line to the fourth).

Natalia Skorlygina, Polina Smertina