China's Power Producers Seek Subsidies to Cover High Fuel Costs

By Wang Ying

Aug. 11 (Bloomberg) -- China's electricity producers asked the government to provide subsidies in the second half of this year to meet losses incurred by higher fuel costs and ease the country's sixth year of power shortages.

``When electricity tariffs are not high enough to cover power companies' cost, the government should start granting subsidies in the forms of rebates from value-added taxes and an increase in cash loans,'' the China Electricity Council said in a report on its Web site.

Four of China's biggest power companies including China Datang Corp. and China Guodian Corp. may have posted combined losses of about 7 billion yuan ($1 billion) in the first half, the Shanghai Securities News reported last month. Power shortages have forced the country to ration supplies in the provinces of Shandong, Hubei, Shanxi, Henan and Liaoning.

Power supply will be ``generally balanced'' in the second half of this year, with some provinces having ``slight shortages,'' the group said in the Aug. 7 report. The shortage may reach 15,000 megawatts in the second half, it said.

The government should expedite power-pricing reforms to help power producers cover losses, it said.

The country's power plants may need 1.6 billion metric tons of coal this year, an increase of 11.5 percent from 2007, according to the report. Power demand may increase about 11 percent this year, it said.

To contact the reporter on this story: Wang Ying in Beijing at wang30@bloomberg.net