Government rules out forming new energy ministry
By Xie Ye (China Daily)
Updated: 2004-12-02 21:34

The top government decision-makers have basically ruled out the possibility of setting up a Ministry of Energy in at least the coming three years, industry sources said.

But the central government is considering establishing a special office directly under the State Council to help manage the energy industry. Senior officials, including one vice-premier, are likely to head the office, the source said.

The proposal, if finalized, may quell recent calls to reform the administration of the energy industry.

In the past few weeks, government departments have been mulling over some kind of body to replace the current Energy Bureau under the ministry-level National Development Reform Commission (NDRC).

Critics said the Energy Bureau, which only has a dozen members of staff, is too weak and inferior to oversee an energy industry that has total assets of more than 10 trillion yuan (US$1.2 trillion).

"Such discussions have cooled off after the top decision-makers suggested reform was so significant and complicated that they won't make it during the tenure of the current government," said one industrial source. "The reform needs to reshuffle the current energy administration."

The tenure of the current government is due to end in early 2008.

"There will probably be a senior-level office to help manage the energy industry," said the source, adding that the proposal is still under discussion.

Director of the Energy Bureau Xu Dingming refused to comment on the issue.

China set up the Ministry of Energy in 1988 but it was dismissed five years later because its administrative function overlapped with other departments such as the then State Development Planning Commission.

The ministry was pointless to some extent as big oil, power and coal companies also enjoyed administrative power under the planned economy at that time.

Facing increasing energy shortages, the government set up an Energy Bureau under the NDRC during reform of the administration in March 2003.

But the bureau failed to curb the widespread energy crunch that broke out in late 2002.

More than two thirds of the country's territory has now suffered frequent blackouts. Coal mines cannot keep up with the surging demand, while oil imports is rocketing as the nation becomes the second-largest oil consumer in the world.

Industrial experts and officials said the bureau was not powerful enough to co-ordinate relations between different sectors such as coal and power. The two sectors fight frequently over coal prices, with many power plants running out of coal stocks and shutting down.

"In most cases, the Energy Bureau is incapable of co-ordinating relations," said Wu Zhongwu, a senior researcher with Energy Research Institute.

The bureau is crippled because much of the administrative power in the energy industry is scattered between different government organs, Wu said.

The pricing department of the NDRC, for example, is in charge of setting energy prices, while the transport department oversees oil and coal transport.

Oil and coal imports and exports as well as management of the oil markets are controlled by the Ministry of Commerce, while the Ministry of Land and Resources steers resource exploration.

The legacy is that China's energy policy is not always consistent, and sometimes, even contradictory.

Zhu Chengzhang, a veteran energy expert, said the bureau lacks the staff and experts needed to handle such a big industry.

The bureau only has 20 some personnel compared with more than 1,000 employees in the Ministry of Energy in the United States.

The Energy Bureau is overwhelmed with specific issues such as project approval, but neglects more important issues such as strategic planning, Zhu said.

"It should study what kind of economy we will develop, what kind of energy we should use, how much should be imported, what are the possibilities for imports... These are strategic issues that need to be thought through," said Zhu.

Critics also said the bureau is too inferior, in terms of official ranking, to connect with other countries to resolve China's imports.

Experts are stressing the need to set up a more senior level energy department, either an Energy Ministry or an Energy Committee, to oversee the industry.

"The power needs to be consolidated into one higher-level government department," said Huan Guoyu, a researcher with a thinktank of the State Council Office for Restructuring the Economic System. "It is conducive for China to form a constant long-term energy policy."

But experts agreed that to reform the administration will be a touchy issue.

It is difficult to reshuffle the current administration and consolidate power.

"The reform has to be thorough to avoid overlapping decision-making," said Wu.

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