Coal: Aid unearthed

Poland, the EU's largest coal producer, was last week given the green light by the European Commission to grant zł.1.3 billion in aid to its coal industry over the 2008-2010 period. The state aid is aimed at covering restructuring costs resulting from administrative, legal and tax expenses as well as labor costs associated with lay-offs, the European Commission said in a statement.

The funds will also help with the costs of underground safety work for the closure of mines, repair work and the rehabilitation of former coal mining sites. But the aid will not cover any costs related to current production, the commission said. The EC is responsible for policing state aid in Europe to make sure that no company gains an unfair advantage which could distort competition.

Last year Poland had to import 5.8 million tonnes of coal, which is equal to the capacity of four mid-sized mines. Since 2004, imports have rocketed by 3.4 million tonnes, while production has dropped by 11.7 million tonnes, according to daily Puls Biznesu.

"For many years, we used to finance the process of closing mines from the state budget. We failed to invest in new fields. That's why imports have grown, and production has fallen," Leon Kurczabiński from Katowicki Holding Węglowy coal group told Puls Biznesu.

Poland is now importing coal from the US for the first time in history and has also become dependent on Russian firms for a large majority of its imported coal. Russia's largest coal producer, SUEK, last year launched operations in Poland. It exported 0.7 million tonnes of coal to Poland last year and expects to increase that number this year.