A push by China to reopen thousands of small coal mines exploration is failing, deepening its worst power crisis in years as local officials still fear Beijing’s wrath if they suffer high-profile disasters.

Weeks after the central government urged miners to reopen the mines, effectively reversing a years-old policy of shutting them in order to improve safety, local officials are proving reluctant. And Beijing’s freeze on coal prices has lowered the incentive for miners.

The failure to increase domestic coal supplies spells trouble for coal-fired electricity generators, who produce four-fifths of the power in China and could add to the emerging power crisis, which has already forced aluminum smelters to cut output by up to a tenth and could stoke demand for oil.

“Local government officials are more concerned about personal interest,” said Li Chaolin, a coal analyst at an industry body based in Beijing. “They are afraid of the punishment a mine accident could bring to them.”

They are right to be concerned. Six government officials in the Luliang region of Shanxi were fired after a blast at a small mine, approved to reopen just a month earlier, killed 34 in June, Xinhua, the official Chinese news agency, reported.

China has been pushing forward a safety campaign for three years, shutting down the kind of small, inefficient, and often dangerous mines that provided 38 percent of its coal last year.

Around nine-tenths of Chinese coal mines are classified as small, but they are eight times more deadly per ton of coal produced than the larger mines.

From 1995 to early 2008, the number of coal mines in China had fallen around 80 percent to about 16,000. Over the same period the death toll is down 40 percent to 3,786 in 2007, according to the State Administration of Coal Mine Safety.

Beijing’s goal is to reduce the number of small mines to under 10,000 by 2010 and to eliminate them by 2015.

But in late May, when coal stocks in key power plants had fallen to critical levels and summer power shortages loomed, the Chinese prime minister, Wen Jiabao, called for an increase in coal output, while the cabinet asked local governments to speed up approvals for restarting small coal mines.

Some have returned to production in Shanxi, the top coal producing province, but many are still closed or performing maintenance, traders and analysts said.

And in late June, the Shanxi provincial government ordered local governments to shut down illegal coal mines, highlighting the conflicting signals that have kept officials cautious.

“How can local officials reopen small mines? They want to keep their jobs,” said a trader based in Shanxi, who declined to be identified because he was not authorized to speak to media.

Beijing last month froze the price miners are paid for thermal coal until the end of the year as it seeks to cap power prices, knocking shares of listed coal firms like China Coal Energy and China Shenhua Energy lower.

But this has had the perverse effect of discouraging mine production and making coal exports more attractive, while not doing anything to cut losses at power generators as the order does not cover prices further down the distribution chain.

In two years Chinese power generators have received just a 4.7 percent increase in the state-set prices they can charge, not enough to offset the soaring price of coal, which until the June freeze had been freed to float with the market.

Asian benchmark thermal coal prices have tripled in just a year to record highs, while domestic supplies remain tight, so local prices should keep rising.

“Miners understand if they don’t dig out all the coal now, they can sell later for a better price. Natural resources will only get more precious,” said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

The impact of the coal shortage is already being felt. There have been record power shortfalls in Shanxi Province, where the government had to ration power supplies, hurting energy-intensive plants like aluminum smelters.

Other industrial provinces, like Shandong and Guangdong, have forecast deep power deficits.

Find More Other News : Coal, Company, Exploration, Mine Trade & Market, Mining Finance, Mining Investment, Mining Top News