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Coal resources tax to be doubled

Ordos City is currently considering implementing a coal resource compensation fee for "exported coal" to help offset environmental damage and fund local infrastructure projects. The proposal, which has recently been approved by the municipal government, is now under review by the Inner Mongolia Autonomous Region authorities. The plan involves imposing an additional 3-5 yuan per ton on imported coal, with the collection potentially managed through transportation initiatives. Ordos holds 39% of the country's coal resources, which are shallow, easily accessible, and of high quality. Major state-owned enterprises such as China Shenhua and China Coal have been actively mining in the region. However, Huang Qing, secretary of the board of directors at Shenhua Group, stated that he was not aware of the documents and declined to comment on the matter. An official from the Ordos City Government confirmed that the increase in coal resource compensation aims to cover extraction costs and encourage local coal processing, reducing reliance on long-distance transport. Compared to Shanxi’s reputation as a "coal capital," Ordos has historically faced challenges in maximizing its coal tax revenue. Before 2001, when coal prices were low, Ordos struggled economically. But after the national price surge, the city saw a boom, with many becoming wealthy quickly. Today, the coal industry is the largest source of fiscal revenue, yet most of the profits remain with large central enterprises like Shenhua and China Coal. According to a recent report by the Ordos Development and Reform Commission, the current coal tax stands at only 9.74 yuan per ton, significantly lower than Shanxi’s 26.6 yuan per ton. This low rate fails to meet the three key functions of coal taxation: income distribution, resource conservation, and revenue generation. The "Coal Sustainable Development Fund," a major component of Shanxi’s coal taxes, is not available in Ordos. While some pilot programs are underway in Shanxi, it remains unclear whether they will be extended to Inner Mongolia. Shenhua Group has not heard of any plans to implement similar reforms in the region. Environmental costs in Ordos are substantial. In Ejin Holo County alone, coal mining has caused farmland collapse and loss of forest and grassland, leading to over 80 million yuan in economic losses. Local companies like Wanli Coal compensate farmers and herders annually, but larger enterprises and exporters have not contributed similarly. A deputy mayor highlighted the environmental impact, including vegetation damage, groundwater depletion, agricultural losses, and infrastructure degradation. The city estimates that environmental restoration costs are far higher than what is currently covered by coal taxes. To address these issues, Ordos proposes increasing the coal resource tax from below 10 yuan per ton to 20 yuan. A phased approach includes raising the tax to 5 yuan per ton, generating an estimated 250 million yuan in additional revenue. Other proposals include monetizing coal mining rights and establishing a "Sustainable Development Fund" to generate 2.5 billion yuan annually. The city also aims to boost coal conversion rates, targeting over 70% local processing by the end of the "Eleventh Five-Year Plan." This would involve converting coal into electricity, methanol, and other products for local use or regional distribution. With coal prices rising sharply—up 27.4% year-on-year in March—Ordos seeks to balance local interests with national energy needs. Officials claim that coal chemical development and new fees will not disrupt national supply. However, experts caution that local efforts to extend the industrial chain must consider broader implications. Jiang Zhimin, vice president of the China Coal Industry Association, emphasized the need for a national perspective. While the impact on coal supply remains uncertain, the association is closely monitoring developments.

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