PiS suggests temporary cuts in Polish coal output

By bne IntelliNews November 10, 2015

Poland’s new ruling party Law and Justice (PiS) is mulling a temporary cut in coal production in a bid to help the market recover, a party official told newswires on November 10.

The suggestion that output could be suspended at some pits is the first from PiS on the topic, and it appears more moderate than many may have been expected. Pledges to save the ailing coal mining industry were a major plank in it campaign ahead of the election it won late last month. The outgoing Civic Platform (PO) government's failure to push a rescue plan past the state-controlled companies it wanted to push into the bid did much to lead to its defeat at the polls.

The largely state-owned industry is operating at a huge loss. At the same time, the sector’s strong unions have consistently halted government efforts to execute reforms.

In the immediate aftermath of the October 25 election, in which PiS won outright majority in the parliament, the party spoke vaguely of “extinguishing” some mines. PiS MP Grzegorz Tobiszowski, the new government's coal mining expert, finally offered some detail on November 10.

“We will face the need to withdraw some coal volumes from the market. This is why we consider to scale some mines down to keep them ready to re-start when prices rebound,” Tobiszowski told Reuters.

At the same time, he was quick to insist that the production cuts won't trigger lay offs of any of Poland's 100,000 coal miners. PiS will propose “a well-prepared protective programme,” to unions he said. Workers at mines slated to reduce output could be shifted to those where production will go on, he added, without explaning the economics.

About to take over power later this month, PiS is clearly wary of ending up in the same position as PO. While hammering the outgoing government over its handling of the problem, the populist party will have few alternative options. 

Like PO, Tobiszowski also talks about state-controlled companies injecting capital into the struggling coal mines. Kompania Weglowa (KW) and Jastrzebska Spolka Weglowa (JSW) are particularly in need of new capital. However, the large utilities on the frontline have been resisting the pressure for months, insisting investment in the mines makes no economic sense for them.

PiS is now thought likely to replace management at many state companies in any case. A step to take in the future would be to consolidate the power sector, Tobiszowski said. 

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