The X-Ray Of A Disaster: Mining Industry Has Buried Almost 8 Bln USD

Experiments conducted on Romania's mining industry for the past 14 years have pushed this sector to the brink of disaster, despite huge funds having been allocated to keep it alive. Not only did measures taken over this period not solve the mining industry's problems, but sometimes such measures even fueled social problems and deepened poverty in the respective areas. At national level, energy consumers have seen energy prices go up year after year. Between 1990 and 2002, The State spent over 6.53 billion USD on the mining industry: 5.2 billion USD as public expenditures and 1.27 billion USD as operating losses incurred by State-held mining companies. Most of the money The State allocated in this direction, that is, 3.4 billion USD, accounts for nearly half of the total sum of public money allocated to investments. Budget-sustained social security expenditures totaled some 250 million USD. However, the revenues derived by mining companies in the said interval were below the targets stipulated in their budgets and approved by The Government. On the other hand, the mining companies' overdue debts (mostly to The State) exceed one billion EUR! Of this total, nearly 110 million EUR is owed to State-held utilities providers, on the count of the energy consumed, but not paid for, by mining companies. Since it is hard to believe that The State will ever collect the mining companies' overdue debts, it becomes clear that the aggregated effort made to keep the mining industry alive amounts to nearly eight billion USD over 13 years! The result of this huge effort is rather poor: Romania's mining industry is, with a few small exceptions, unprofitable.

Before 1990, the mining industry employed over 350,000 people. By late 2002, it was downsized to 68,800 people. Based on this information, The Government has recently prepared a strategy for 2004-2010 which comes with a number of measures intended to render this industry profitable. The financial restructuring of mining companies will consists of separating unprofitable mines from the rest and turning them into small companies that will take over largely overdue debts. Payroll expenditures will be placed under strict control also within this strategy. The mines marked for shutdown will no longer go through an intermediate, "conservation,' stage, as the costs of this procedures are very high. The Government's strategy indicates that, in keeping with past experiences, the cost of conserving mines is nearly as much as the cost of shutting them down, that is, 600 billion ROL against 800 billion ROL. Many mining companies will be privatized or will enter partnerships with private companies. Six years from now, the mining industry will only employ 5,800 people, as 63,000 of the 68,800 people employed in end-2002 will be laid off. The Government, however, does not have an option for some 15,000 of the total 63,000 people to be laid off by 2010 and it is believed that they will not be able to find another job. Consequently, they will join the category described as "chronically unemployed.' Moreover, of the 63,000 people to be laid off by 2010, only 3,000 (five percent) will be able to start a business, while some 21,000 of them will find another job, The Government estimates. Developing infrastructure appears to be one way of creating jobs, as calculations indicate that infrastructure projects may create some 17,000 new jobs over the next three years.

What The Government would like to accomplish is set the mining industry on a commercial basis, cut subsidies to ore and lignite extraction sectors completely as of 2007, focus investments on well-performing companies in view of selling them, privatize lignite quarries either as stand-alone companies or as companies integrated with thermo power plants, and shut down money-losing mines. The Government estimates the financial effort required for the next six years at 2.2 billion USD, of which 1.2 billion USD will be needed by 2007. However, no one guarantees that, six years from now, the mining industry will not be as decrepit as it is now, the only difference being that the total bill may amount to ten billion USD instead of eight billion USD... Especially considering that The Government's strategy does not stipulate specific measures for each company, in accordance with specific situations.

At this moment, the mining industry comprises 12 companies, 120 mines and quarries, 23 processing plants, all divided into four branches: pitcoal, lignite, ore and salt. The industry has only managed to secure ten percent of the overall needed investments out of its own pocket, with the exception of The Oltenia National Lignite Company, which secured 80 percent of the investments it needed on its own. Post-1990 governments have continuously subsidized the mining industry as a whole, without developing a strategy of channeling money to the viable components. Some 14 years after the process started, the industry has been downsized to one quarter of the original personnel, while the taxpayers' pocket is eight billion USD lighter. However, despite personnel cuts and piles of expenditures, energy prices are ever growing.