Update: State Council criticizes illegal power construction in Inner Mongolia

By Terry Wang

In what is regarded as the latest salvo in the central government's battle against disobedient provincial officials, Premier Wen Jiabao criticized the Inner Mongolian government on Wednesday for allowing power plants to be constructed in violation of state guidelines.

A strongly worded message from a State Council meeting chaired by the Premier says that the local government "illegally approved land use, filed false reports and did not follow proper bidding procedures" during the rushed construction of the Xinfeng Power Station in the city of Xinzhen, according to state news agency Xinhua.

"It can be regarded as a sign indicating that the central government is even more determined to impose 'macroeconomic control'," Yao Wei, an analyst with the Shanghai-based Guotai Junan Securities told Interfax.

The government's "macroeconomic control" policies were introduced to try to curb overinvestment and unsustainable rates of economic growth, but they have become a symbol of Beijing's faltering power over regional governments.

With the central government worried about excessive regional rates of economic growth and eager to enforce its strict "macroeconomic control" measures on the provinces, the latest statement was aimed at making an example of the Inner Mongolian Autonomous Region, Xinhua said.

The State Council warned that anyone who disobeyed instructions relating to national "macroeconomic control" measures would be punished.

On July 8, 2005, an accident took place during the construction of the Xinfeng Power Plant, causing six deaths and eight injuries. Investigations by seven ministries and commissions found that the local authorities had acted beyond their remit when giving the project the go-ahead.

According to Xinhua, the project started construction in April 2004, and was scheduled to be completed by the end of 2005.

However, at the end of May 2005, the National Development and Reform Commission (NDRC) issued special orders to deal with projects that had been launched without state approval in Inner Mongolia. The Xinfeng power project was one of them.

"The accident, with six dead and eight injured, was far less serious compared with certain coalmine accidents," said Yao Wei. "However, the project constructors ignored instructions to stop by ministries and commissions and just carried on, which annoyed the government. Local government has gone too far this time."

Yao added that it was difficult to force local authorities to fall in line with state "macroeconomic control" measures because local governors were motivated to encourage as much investment as possible.

"They can get more tax revenues and satisfy energy demand at the same time," Yao said.

Officials with the regional and local NDRC were not willing to reveal who gave the go-ahead for the project, but they told Interfax that construction had been suspended since the central government investigation was launched last year.

One official said that the regional NDRC was not responsible for giving the approval.

The chairman and two vice chairmen of the Inner Mongolian regional government have been ordered to write self-criticisms, said Xinhua.

The Caijing (Finance) magazine said that the Inner Mongolia Power Group was actually the largest shareholder of the project, but the group, as a power grid operator, was not legally allowed to own power generation assets.

According to the State Council, power projects with total generation capacity of 8,600 MW have started construction in violation of regulations, creating a "very serious" problem. Technorati Tags: inner mongolia, power station