According to the Ministry of Industry and Trade, in the first half this year, coal consumption stood at 21.5 million tonnes, an increase of 9.15 per cent against the same period last year.—File Photo

This a drastic fall compared to the 1.2-1.3 million tonnes currently being exported every month, says Nguyen Van Bien, who is deputy general director of Vinacomin (Viet Nam National Coal and Mineral Industries Group).

Bien said that with the new increase in export tariff, in the last six months of this year, the total amount of coal exported is estimated to reach 2 to 3 million tonnes.

This means that the country's total coal exports for this year are expected to reach 10.5 million, or 4-5 million tonnes less than 2012.

He said that if the current export tariff remained unchanged, the country's total coal export volume could reach between 41.5-43 million tonnes a year.

Coal consumption has seen a gradual decline as the fossil fuel has been hit with many kinds of fees and taxes. For instance, the tax on natural resources, which affects coal, has risen from VND230 billion (US$11 million) in 2007 to VND3,120 billion ($148 million) last year.

In addition, there is no tax refund on the value added tax (VAT) paid on coal. Prior to 2005, coal exports enjoyed a tax refund on VAT. As of 2009, this policy was not applied to coal exports, therefore this resulted in coal for export becoming VND150,000 a tonne more expensive.

Bien said Viet Nam's tariff on coal exports are among the highest in the world. Every year Indonesia exports around 280 million tonnes of coal but no export taxes apply. Australia also applies a zero export tariff and China exports hundreds of millions of tonnes of coal every year but has only a 10 per cent export tariff.

He said that if export tariff on coal rise to 13 per cent, this would put Vinacomin's business performance in jeopardy. Currently, most domestic coal is unprofitable after a 10 per cent export tariff has been deducted.

The domestic coal sector also still suffers from difficulties due to the global economic slowdown while many countries have invested heavily in coal mining,creating an abundant supply of coal on the global market.

Coal now also has to compete with a range of new energy sources, some of them renewable. This saw a sharp drop in global coal prices last year which has now panned out to create a new price level.

However, coal mining in Viet Nam has entered a difficult period as coal mines have now become deeper with many now over 300 metres deep and coal miners risk being trapped by flooding, fires or collapses.

To cope with the increase in production costs, Vinacomin has come up with a number of solutions, including increasing productivity. However, this is a temporary solution, and if it becomes prolonged, this will affect the sustainable development of the coal sector in the future

As a result, Vinacomin has had to slash its salaries by 5 per cent and a mass temporary layoff is also being considered due to the low level of coal sales. Also, a 5 per cent pay cut across the board in the first half of the year would follow last year's cut of 10 per cent.

According to the Ministry of Industry and Trade, in the first half this year, coal consumption stood at 21.5 million tonnes, an increase of 9.15 per cent against the same period last year. — VNS