The government has launched a nationwide probe into soaring coal prices that have contributed to the power supply crunch this winter.

The move comes at a time when many power companies are running out of thermal coal as fuel after failing to reach agreements with coal mines on pricing. Generating plants in some areas have been forced to halt operations, which in turn, has led to rolling blackouts.

The government hopes the regulation of coal prices will help quiet the spat between the coal and power industries, and alleviate the electricity shortfall.

The National Development and Reform Commission said it will regulate those illegally raising coal prices, stockpiling the supply for speculation, and adulterating products.

It will also tend to exorbitant prices charged to coal companies by local administrations and transportation companies.

"The random charge and price rise have intensified the conflict between the coal demand and supply," an unnamed official with the commission was quoted by the Xinhua News Agency as saying.

"The government inquiry aims to regulate the coal market and ensure the necessity of the national economy as well as the people's life."

Rapid economic growth -especially the surge of output in steel, cement and electricity industries - have pushed both the coal demand and prices higher.

The price of coal has increased by 3 percent on average, industrial officials said. And in some areas like East China, the prices have increased by more than 20 percent.

Earlier in May, coal and power companies quarreled over coal prices and delayed signing coal supply contracts until the summer.

Industrial sources say the strong market demand for coal has exceeded the contracted volume. And coal mines are requesting a price rise for the excess supply. Power companies, however, claim they cannot afford the price hike and pass the cost on to users since the price of electricity is capped by the government.

Due to the coal supply problem, 12 power plants in East China and 10 plants in North China and may only have reserves for two to three days.

Zhu Deren, deputy-director of the China Coal Industrial Association, said the coal shortage is not a problem of supply, but a problem in price.

"The production increase is fast this year, and the price rise is justified," said Zhu.

Coal production has increased by 21.1 percent year-on-year to 1.4 billion tons from January to November, exceeding last year's total production. The full-year output of coal is expected to hit a record of 1.6 billion tons.

Late last month, the commission held a national television conference urging both coal and power companies to compromise as a way of ensuring a stable coal and electricity supply.

(China Daily December 11, 2003)