18 May 2011 Last updated at 00:55 ET

China power cuts set to increase on rising coal costs

The Yangtze River is so dry this year it is affecting hydropower production

China has started rationing electricity to try and stave off an energy shortage that government officials say could be the worst since 2004.

State-owned power generating companies are dealing with high global energy prices that have cut their profits.

China has also banned the export of diesel, to try to meet domestic demand.

Power cuts occur every summer, but this year rising coal costs and a drop in hydropower output mean they could be much more severe.

The China Electricity Council (CEC) said on Tuesday that China's five biggest power producers reported losses of 10.57bn yuan ($1.62bn; £995m) in their thermal power plants in the first four months of the year, according to the Xinhua news agency.

The figure was about 7.29bn yuan more than in the same period last year, said the CEC in a statement, which blamed soaring coal prices.

The CEC is warning that this poses "great risks" to ensuring power supplies during the peak season this summer, said Xinhua.

The five main power producers supply about half of the country's power, according to the CEC.

Analysts say China has not raised electricity tariffs significantly because of rising inflation worries.

China's price-setting agency was reported to have increased electricity tariffs in some parts of the country in April.

However, observers say the rise was too small to restore profitability for many coal-fired power generators.

Instead, manufacturers in some provinces say they are already being ordered by local authorities to limit electricity usage, according to the Wall Street Journal.

Some provinces have reportedly started rationing electricity earlier this year including Hunan, Zhejiang and Anhui as well as Shanghai and Chongqing.