The price of coal should be increased to offset environmental losses and cover labor costs, the governor of Shanxi Province said yesterday.

"Given the current price of 360 yuan (US$50) a ton, it's still far from enough to cover exploration and labor costs, and to remedy environmental damage caused by mining," Meng Xuenong said.

Shanxi Province produces a quarter of all the country's coal.

Despite the central government's micro-control measures, coal prices may continue to rise in the coming years, Meng said.

The price of coal has been on a steady increase since 2002. Figures from the China Coal Transport and Distribution Association showed that the price of coal for power generation in key contracts for this year has gone up by 30 to 40 yuan a ton, up 10 percent year on year.

The rise in coal prices and in prices of basic oil products have also helped push producer prices, which measure the cost of goods as they leave the factory, to rise 6.6 percent last month over the same period last year - the highest level since December 2004, the National Bureau of Statistics said yesterday.

Officials have said the spike in consumer prices starting last year has been driven by food costs, but analysts said yesterday's data suggested pressure for across-the-board price rises is mounting as factories and households compete for resources.

Meng also said this year's coal supply for power generation may still face shortages and he called for energy restructuring.

The country encountered a crisis in supplies of coal used for power generation in January and February, due to strong demand and logistical problems caused by snowstorms.

Meng said stockpiles of coal for power generation in major power plants are back to normal and coal exports are being resumed.

"But to solve the problem, we need to optimize our energy structure and promote new energy," he said.

At present, Meng said, 87 percent of the country's power supply relies on coal, while in some developed countries only 40 percent of power supply come from coal.

In response to a question on whether some illegal coal mines that were shut down restarted operations to ease the energy crisis, Shanxi's Party Secretary Zhang Baoshun said it was customary for small mines not to operate during the Spring Festival.

Zhang said coal shipments from Shanxi during the festival were from State-owned mines or stockpiles. But he admitted the widespread shutdown of illegal or small mines had exerted some negative impact on the province's output.

Figures from Shanxi showed that in recent years, the number of coal mines in the province has dropped from 10,000 to 2,820.

(China Daily March 11, 2008)