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ArticleName Economic conditions of coal industry performance in Russia
DOI 10.17580/gzh.2019.01.07
ArticleAuthor Galiev Zh. K., Galieva N. V.

College of Economics and Industrial Management, NUST MISIS, Moscow, Russia:

Zh. K. Galiev, Professor, Doctor of Economic Sciences,
N. V. Galieva, Associate Professor, Candidate of Economic Sciences


Russia is the sixth largest coal producer in the world. At the present time, the domestic market of fueland-power resources disables coal products from competition with gas and oil. Russian coal shipment is 50 % export. Generally speaking, formation of prerequisites for the efficient performance in the industry should be preceded by implementation of the sequence of some procedures: market concentration analysis within an industry; formation and control of a set of interconnected economic performance standards of a business undertaking; assessment of the required and sufficient levels of production efficiency in the market conditions (effective management). The economic literature offers three criteria to evaluate the market concentration of a product: Herfindahl–Hirschman Index (HHI); dispersion of market shares (σ2) and Linda index (IL). The calculations using these criteria show that the Russian coal industry features low market concentration by type of “free” oligopoly of a few large companies that function efficiently and neither prevails. This conclusion is confirmed by the results of the structural analysis of the coal market in Russia: percentages of annual outputs of underground and surface coal mines are 18 and 11 %, respectively. On the whole in the coal industry, profitability of assets is comparatively low—7.3 % upon average. Given such level of profitability, payback period of capital investment is around 10 (9.84) years; in order to abbreviate this time, e.g., to 5 years, it is necessary to raise profitability of assets by more than 2 times (to 14.87 %) as against the current level. At this conjuncture, the prime focus of attention should be the effective management in the coal industry. This article formulates relevant requirements: marginal profit should exceed fixed costs in the planning and accounting periods; production output (sales) in the planning period should take into account price variance of coal products; it is necessary to ensure advanced increase of such technical and economic indicators as labor productivity over product cost, product output over labor productivity, proceeds of sales over total production cost, profit return over proceeds of sales. Attraction of investment in the coal mining industry requires striving for the calculated level of inter-branch competition such that the payback period of capital investment complies with the standards of global market economy, which is the dominant requirement of investment attraction in the coal industry.

keywords Coal industry, mines, Herfindahl–Hirschman Index, dispersion of market shares, Linda index, assets profitability, payback period of capital investment, effective management, economic performance, ratio

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