Coal-rich Shanxi province has vowed to further clean up all coal-related unreasonable taxes and fees, in an effort to save its ailing coal sector, according to a teleconference held by the provincial government on June 23.

The governor of Shanxi, Li Xiaopeng, has put coal sector reforms at the top of the agenda, leading a task team to push forward reforms in four areas – cleaning up unreasonable taxes and fees; reforming coal sales through highways; deepening coal management system; promoting clean and low carbon technologies.

According to Shanxi Daily, if five categories of unreasonable taxes and fees are removed by July 1, it would save coal enterprises 6.09 billion yuan or 6.5 yuan/t this year. With two more fees eliminated in 2015, there would be additional savings of 7.47 billion yuan or 7.8 yuan/t.

On June 19, the provincial government unveiled comprehensive measures passed during an executive meeting two days ago, vowing to lower the burden on coal enterprises through eliminating all coal-related administrative charges and service fees, and reducing other fees and funds.

According to the measures, the province has eliminated two categories of unreasonable fees since the beginning of the year, including all taxes and fees not sanctioned by the provincial government or above, and any additional taxes and fees piggybacked on legitimate ones.

It also lopped 3 yuan/t off the coal sustainable development fund, reducing the levy for coking coal up to 20 yuan/t and thermal coal up to 15 yuan/t.

From July 1 onward, the province will eliminate the coal inspection management fee and lower the quality inspection fee. Meanwhile, it would slash the service charges levied on the five major coal groups by 20% this year, and scrap these charges completely from January 1, 2015.

Additionally, the government will reform the sales system for coal transported on highways, barring relevant enterprises from charging service fees in the name of centralized sales – a system under which miners and buyers have to sign sales and supply contracts with the county and prefecture-level branches of Shanxi Coal Transport & Sales Group Co., Ltd. and pay various fees and charges to get coal transported on highways.

To effectively implement these measures, the provincial government will send six inspection teams on July 7 to monitor local governments’ compliance with the new rules. Conformity to these measures will become a factor in judging a local officials'' performance.

Earlier this year, the provincial government said coal enterprises would continue to be exempted from the environment recovery fund (10 yuan/t) and mine transformation fund (5 yuan/t), and only need to pay half of the service fee or 0.05% of the value of transactions at the China Taiyuan Transaction Center – part of the 20 measures (click HERE for details) unveiled in late July 2013 to shore up the coal sector.

While coal enterprises are expected to benefit from further implementation of such measures, there could be less-than-expected positive changes that will fundamentally reverse the downward spiral. On the contrary, it is more likely to see a significant increase in coal produced in the province, further weighing on the market and slowing rebalancing of the market.

Official data showed that, Shanxi overtook Inner Mongolia to recrown the nation’s top coal producer in the first five months, producing 386.71 million tonnes, up 1.44% year on year and 14.6% higher than Inner Mongolia’s 337.48 million tonnes during the same period.