Pit plan backfires as cheap coal floods in

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The Independent Online

The Government's attempts to save the coal industry by banning new gas-fired power stations has actually helped to kill it off, analysts believe.

Far from triggering a huge new demand for the indigenous product, record levels of foreign coal have poured into the country at prices up to a third lower than for the British version.

Clyde Ports, for instance, has announced that coal imports through its Hunterston docks were up by 17 per cent last year and 300 per cent in just four years.

In November it unloaded the single biggest cargo of steam coal ever imported into this country, and with more foreign companies taking over Britain's coal-fired power stations, it predicted a rosy future.

RJB, Britain's sole remaining major producer, has warned that without urgent government aid it will have to start closing its last 13 deep-mine pits as early as the end of the month.

Peter Atherton of Dresdner Kleinwort Benson, the broker, warned that the Government's moratorium on gas-fired plants - introduced in 1998 - has "directly caused British pits to close".

"The moratorium restricted the threat of new entrants to the market, so the regulators had to use other levers to introduce competition - forcing the sales of some power stations. These were bought up by Americans mostly, and quite expensively so they needed cheap coal," said Mr Atherton.

"There are no prizes for guessing where they're going for it. British coal just can't compete," he added.

Both Mr Atherton and RJB itself now see government aid as the only way in which to save the remnants of the British coal industry, which once employed more than a million men.

"If the Government wants to support the coal industry, they should provide direct subsidy not play around with the market. That always makes things worse," said Mr Atherton.

A spokesman for RJB said it hoped to hear about its application for £73m of transitional aid from Stephen Byers, the Trade and Industry Secretary, within the next week.

"Without direct government aid RJB cannot compete against subsidised producers in Europe," he said. But Mr Atherton also warned that subsidies could not provide a long-term solution."Giving this money would be like buying 10,000 cars from Rover. It would stave off the evil day, but not stop it happening forever."