[BEIJING] China's state planner said on Monday it will force power companies to beef up stockpiles of coal during peak demand seasons as part of draft rules setting out the government's new inventory system.

During winter and summer, power companies' coal inventories must be five to 10 days above normal levels, the National Development and Reform Commission (NDRC) said as it outlined the draft policy.

When supplies are short and prices are rising, power companies can have on hand an extra 10-20 days of inventory, it said.

The policy is the latest effort by Beijing to ensure sufficient supplies of coal during periods of high demand, and comes after the government had to scramble last year to avert a national power crisis following government-enforced cutbacks in coal output.

The steps are also aimed at preventing panic buying by power companies or hoarding by reluctant sellers in times of tightness, which can add further fuel to price rallies.

Minimum inventory for users in sectors such as construction and power are the average of the past three years, while power plants in some regions including major coal producing regions Inner Mongolia, Shanxi and Shaanxi should have at least 15 days of coal on hand, it said.

The further the coal has to travel to reach the utility, the higher the inventory a power plant may need to have, it said.

If the companies do not meet these criteria, the government will penalise plants with measures such as curbing their power output, it said.

The NDRC will now seek feedback from the industry until Sept 10.

REUTERS