China, the world's leading coal producer and consumer, is to levy resource tax on coal on the basis of sales instead of production from Dec. 1, in a move to shore up the dim industry and improve the deteriorating environment.

China, the world's leading coal producer and consumer, is to levy resource tax on coal on the basis of sales instead of production from Dec. 1. [File photo]

The key to the reform, however, is to clear out charging fees involving coal. Due to historical reasons, Chinese coal producers pay taxes as well as fees under various names, such as coal price adjustment funds, compensation fees for native minerals, and fees for local economic development.

The State Council, China's cabinet, decided to clear off these fees before implementing the resource tax reform on coal, at an executive meeting on Sept. 29.

The reform plan bans local governments from setting up funds that charge coal producers, according to a circular issued by the Ministry of Finance and the National Development and Reform Commission (NDRC) in October.

The circular stipulated that no more administrative charges or governmental funds involving coal, crude oil, and natural gas, are allowed to initiate by any local government, department or unit, except with permission from laws, rules and State Council regulations.

There must be accountability for any violations, warned the Ministry of Finance and the NDRC, who also set Sunday as the deadline for local governments to report their cleanup campaign and the list of fees to be canceled and to be kept.

China's top coal producers have sped up actions to meet the deadline. North China's Shanxi province has cut 10.8 billion yuan (1.77 billion US dollars) of fees coal producers have been charged since a massive cleanup in June.

"The 10.8 billion yuan represents what can be calculated," said a coal industry insider asked to be anonymous. "Coal producers' burden have been eased even more significantly if those 'invisible charges' are counted, as many of them are just uncountable."

Shanxi, which has yielded one fourth of the country' s coal since 1949, has seen sharp decrease of coal profit since the second half of 2012. The per ton earning dropped to 2.6 yuan (0.4 US dollars) in the first three quarters this year, compared to 45 yuan (7.4 US dollars) in 2013, and 139 yuan (22.8 US dollars) in 2011.

The heavily coal dependent province was alert to the worsening situation in the coal industry even before the national reform was to launch. It worked out 20 measures last year in support of the industry, which cut 14.5 billion yuan (2.4 billion US dollars) burden for coal producers.