Prime Minister Vladimir Putin has held a meeting on the results of the coal industry’s modernisation and development prospects in Kemerovo
24 january 2012
Vladimir Putin’s opening remarks:
Ladies and gentlemen, friends,
We are here today for an important meeting on the development of the coal industry. We will be discussing the development prospects of one of the basic industries in the Russian fuel and energy sector, the coal industry. We have approved general development plans for the oil and gas industries and the allocation schedule for the power stations, launched a comprehensive hydrocarbon development programme for Yamal and the north of the Krasnoyarsk Territory and are implementing the Eastern Gas Programme.
As I said, today we will consider one more key issue, one more strategic document – the long-term strategy for the development of the coal industry until 2030. We expect to approve an upgraded programme after the meeting. The first stage would run until 2015, the second stage until 2020 and the third stage until 2030. Total financing under the programme is estimated at 3.7 trillion roubles, including 251.8 billion in budget funds.
The overall economic progress and the growing efficiency of coal mining, which I am noting with pleasure, have allowed us to draft these ambitious plans and to outline goals such as our emergence in new markets and the development of potential deposits and deep coal processing. I’d like to remind you that a relatively short time ago, in the 1990s, some people in Russia proposed closing the industry altogether saying it lacked potential, as you most likely remember. Actually, people still say from time to time that the coal industry, or the machine-building or the automobile industry hold no promise, suggesting that we close them down and retreat into the taiga, where we will live by picking mushrooms and berries. But the coal industry is clearly gathering momentum and has confidently passed the test of the global financial and economic crisis with the assistance of the state and, I am happy to note, due to the responsible attitude of private business.
Just for reference: In 2011 the Kuzbass mines produced over 192 million metric tons of coal. This is a quarter higher than the record figures of the Soviet period. Kuzbass production reached its peak in 1988 with 153 million metric tons, while last year we produced 192 million metric tons.
In 2011, Russia produced – or, as the miners say, dug up – a total of 336 million metric tons of coal. The results of the Russian coal industry were quite good last year. Profits increased by more than 50%, reaching 122 billion roubles.
A solid financial foundation allows us to invest in the development and modernisation of new fields, and the re-equipment of the currently operating facilities. This all pays off in the form of a modern and competitive industry. Over the past five years, productivity – which is another telling indicator – has grown by nearly 30% in the coal industry, and this is a good reason to be glad.
I should specifically mention the restructuring programme of the coal industry. This programme was vital in order to resolve social issues such as housing, as well as environmental issues. This work must continue and it will continue. We will allocate an additional five billion roubles towards it this year. Part of this money will be used to relocate miners’ families and to provide everyone who is eligible with a basic “coal allowance” for households. I ask both owners of the coal enterprises and trade unions to maintain their focus on social issues.
This is entirely relevant to labour safety. The Raspadskaya tragedy was a serious lesson for us all. We had to make a series of decisions to improve safety.
I have just met with the widows of miners and I would like to say thank you to the Raspadskaya mine owners and shareholders, to the trade unions and regional officials for their considerate attitude. There is no issue that we promised to resolve that did not receive attention. Thank you.
We developed a number of administrative and economic leverages that require strict compliance with labour safety regulations from the employer. We set this down on paper.
The system of payment for miners’ work has undergone dramatic changes as well, with a focus on labour safety in order to prevent the sacrifice of the life and health of the miners for the sake of production. Now, as you know, at least 70% of the miner’s wage is a fixed payment and the remaining 30% is performance-based. The average monthly salary in the mining industry grew by nearly 20%, totalling 32,000 roubles by the end of 2011, which was the largest salary increase across all production industries.
As I draw your attention to this fact, I would like to note that both shareholders of mining enterprises and the respective officials, along with the trade unions, are looking for agreed-upon decisions that positively affect both production and the social sphere. What is particularly pleasing – and there is a lot to be pleased about today – is that production and performance are growing, while the number of industrial injuries is decreasing. This is objective statistical data.
Safety is our top priority. For this reason, we have decided to allocate some 500 million roubles more from the federal budget directly for research and development in this area. The money will be spent on development of personal protective equipment, rescue aids and comprehensive mine safety systems.
Now for the future prospects. Experts predict that the demand for coal will grow in the coming decades, both in Russia and in the global market, which is particularly important. Our coal industry, related industries and transport infrastructure must be ready to respond to this demand. We must be able both to maintain and to significantly extend our presence in the market, including the highly promising Asian and Pacific markets.
We must clearly understand the source and the amount of coal we plan to produce, and we must know how we are going to arrange domestic and international logistics including railways and sea ports. We must also understand how we are going to develop our engineering capabilities in order to produce modern equipment.
In this regard I would firstly like to point out the need to be very careful about exploring the stocks of both existing and newly discovered fields. I am talking about traditional mining areas such as Kuzbass, Eastern Donbass, Vorkuta, and prospective areas in Tuva and Yakutia.
Second, we need to step up the implementation of the latest coal production, processing and enrichment techniques, which significantly increase the added value. This will help increase the earning capacity of the enterprises and create new jobs.
Third, we will need skilled employees and scientific research if we want to bring the coal industry in line with the highest international standards. This task should be addressed jointly by the government and business. I’ve already mentioned that we had decided to make additional investments in occupational safety research and development.
Fourth, we need to remove all infrastructure limitations that stand in the way of the further development of the industry. Primarily, this has to do with the bottlenecks in railway transport and at ports. We don’t want to keep running into the same problem with the supply of train cars or railway and port congestions. Today, the amount of coal stored in warehouses at some coal pits is three times larger than the designed capacity due to transport problems. Clearly, if this issue remains unresolved then there’s no point in producing more coal. Then you would have to deal exclusively with clearing out warehouse.
In addition to building new roads, the more intensive use of existing railroads using state-of-the-art techniques and expertise is an essential task. We should increase the transport of goods by drastically upgrading existing railways while focusing on the following:
- increasing the capacity and number of cars;
- increasing railway traffic frequency using the latest technology, such as GLONASS;
- increasing speed and cutting the time spent by cargo in transit;
- cutting idle time during loading and unloading;
- streamlining the distribution of cargo and passenger flows among various types of transport.
We must implement several railway development projects in northwestern and southern Russia, as well as in the far eastern parts of the country. In addition, a self-regulating organisation similar to the Market Board in the power engineering industry needs to be established in order to coordinate work and balance the interests of market participants.
I believe we must revise the transport strategy immediately. This issue holds back implementation of our plans to develop natural resources and create new industrial centres.
Certainly, we need to take full advantage of the partnership between the state and private businesses as a way to attract investment in infrastructure. We need to pool efforts and resources of producers, processors and railway carriers all the more so since coal mining enterprises are prepared to invest in transport projects. Railway development projects are very capital-intensive, but they lead to the growth of other industries, the creation of new production capacity and jobs, as well as significant additional income to budgets at all levels of government. I believe that this revenue can be used to co-finance the infrastructure projects we are discussing.
By placing the funded components of the retirement savings managed by Vnesheconombank into long-term infrastructure bonds we can create a significant reserve for financing the expansion of the railway system. I’d like to ask the Ministry of Economic Development, the Ministry of Finance, the Ministry of Transport and the Ministry of Healthcare and Social Development to examine this issue and submit it for further consideration. I expect that we will be able to make a very important step forward today. I’m talking about signing an agreement between 24 major shippers from various industries that account for over 80% of all railway cargo, Russian Railways and Vnesheconombank. In fact, the agreement is a new mechanism to protect the interests of the shippers and transport companies seeking to solve one major issue – the social-economic development of the region and the country as a whole. Shippers and railway authorities have long-term commitments to upgrade infrastructure with the investment support of state development institutions.
Colleagues, we expect to be successful in this endeavour. Today, a set of measures is being developed that will make it possible to increase coal production by 100 million tonnes by 2030 to a total of 430 million metric tons per year in accordance with the long-term coal production programme.
I’d like to thank all participants of this meeting for the great work that they have done during preparations. Adoption of the long-term programme for the development of coal industry was lagging far behind also because the government programmes including their implementation mechanisms so far have not been adopted. It’s very important that all actions under the programme and instructions issued at today’s meeting are fulfilled despite the busy political calendar and possible future staff rotations. Please note that this is a critical issue for a number of executives, so plan your work so as to be able comply with all the instructions before May 1. We will closely follow developments in this sphere.
We will discuss these issues with our colleagues during the video conference. For now I’d like to say the following. I’d like to call your attention to the fact that much of the rolling stock is already operated by private owners. I very much hope that private carriers and shareholders will work closely with Russian Railways. By this I mean that dispatcher functions will still be performed by Russian Railways. Not only Russian Railways but shippers need the rolling stock. What we need here is coordinated work among all links of this chain. Please take a note that all links must be working properly. Clearly, a lot of money has been invested after recent events related to the privatisation of shipping companies. Certainly, the investors expect this money to be used effectively and to be paid back – that’s clear and that’s the way it’s supposed to be. Let me again appeal to everyone, including Russian Railways and owners of shipping companies, to work closely together and to find mutually acceptable solutions.
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Vladimir Putin’s closing remarks:
Ladies and gentlemen, in conclusion I would like to say that I have just signed this long-term programme. Here it is – I have looked through it carefully. It provides for coordinating a large number of positions, which is hard work considering the large number of people involved. I would like to say thank you to everyone who has been working on it, especially recently. I know that it was a difficult task to accomplish because it involved the coordination of interests, many of them conflicting interests. However, we have done it. I believe this speaks to a sense of responsibility, growing professionalism and a willingness to compromise in the interests of developing the industry, Russian regions and the entire country. And now all participants should sign it. I think there are 24 of them, if I am not mistaken.
Igor Sechin: Mr Putin, not everyone has arrived, only coal industry representatives.
Vladimir Putin: How many people have to sign in all?
Igor Sechin: About 30 people.
Vladimir Putin: Yes, about 30. This will be a difficult process. It is difficult to come to an agreement when there are two or three people, and it appears absolutely impossible when there are 30 people, yet we have done it. Thank you, all of you. I wish you success. Thank you.
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After the meeting, Vladimir Putin attended the signing of an agreement to attract investment in infrastructure projects by representatives of Russian Railways, Vnesheconombank and major shippers.
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Before the signing ceremony, the prime minister toured an exhibition on coal mining safety and was shown a unique Russian device, GORNASS, used for communication with miners and rescue teams during mining operations and in case of emergency.