Pakistan’s surging electricity demand, set to rise by 19% from 2025 to 2030, presents a growing challenge amidst the nation’s increasing reliance on imported energy sources, impacting its economic outlook. Amidst this backdrop, Thar Coal emerges as a compelling solution, offering one of the most cost-effective baseload fuels capable of delivering an impressive 100,000 MW of electricity over the next 250 years.
However, the Thar Coal project, despite its immense potential, is currently at a crossroads, grappling with a critical financial challenge. The mining company overseeing the Thar Coal Block-II project has faced a precarious situation since the second quarter of 2022 due to incomplete payments. While certain payment portions were disbursed in 2023, these disbursements ceased in the past three months, exacerbating the issue.
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“At the forefront of the Thar Coal Block-II project’s challenges lies the urgency to settle dues amounting to over $43 million at this stage. Allegedly, a critical $10 million is required every month to honour Operations and Maintenance (O&M) contractors to ensure uninterrupted mine operations, prompting an urgent need for government attention,” revealed an official in discussion with The Express Tribune.
“If the critical $10 million per month payments are not cleared, the mine operations are likely to be halted, which, in turn, will impact the power generation of Thar-based Independent Power Producers (IPPs), who currently stand as the country’s most economical energy producers,” cautioned Yousuf M Farooq, Director of Research at Chase Securities.
The government’s recent emphasis on harnessing Pakistan’s rich indigenous resources to reduce import dependency is commendable. However, there exists an opportunity for the government to intensify its support and attention to address the challenges faced by the Thar Coal project. Farooq emphasised, “The transformative impact of this project on energy stability and our economy underscores the critical importance of promptly resolving any outstanding dues, ensuring seamless mine operations, and sustaining the momentum of this pivotal initiative.”
“However, this projection could be jeopardised if the government does not clear the outstanding payments. The mine company owes the Chinese contractor dollar-denominated payments under the heads of operation and maintenance (O&M) which are critical to managing the mine’s expansion Phase III,” he warned.
Thar Coal Block-II currently contributes a substantial 1,320 MW of electricity to the overall 2,640 MW generated by Thar Blocks I & II combined. The repercussions of inaction extend beyond the immediate halt of mining operations.
The Thar Coal mine stands as a critical asset in Pakistan’s energy landscape, a testament to its potential to reshape the nation’s power dynamics. The incoming government should take decisive action on this critical matter to ensure its continued viability.
“Immediate action is imperative to ensure the uninterrupted operation of the mine by addressing foreign payment issues. These payments are crucial for maintaining smooth operations and preserving the integrity of the mine’s expansion plans,” stressed the official. “Neglecting this necessity not only threatens to halt a promising indigenous energy source but also endangers Pakistan’s pursuit of energy security and economic growth. This pivotal moment demands decisive action to safeguard the future of Thar Coal and, consequently, Pakistan’s energy landscape,” he added.
Coincidentally, China Machinery Engineering Corporation (CMEC), the operator of a Chinese coal mine in Thar Block-II, recently issued a stark warning. They declared that unless their outstanding receivables of $50 million are settled by September 10, 2023, they will cease coal extraction activities.
CMEC conveyed its concerns to Sindh Engro Coal Mining Company (SECMC) through a letter, revealing that it has not received any payments in August, and its overdue receivables reached $50 million by the end of July 2023. This ultimatum arrives at a time when Thar coal is emerging as a cost-effective source of power generation in Pakistan.
Published in The Express Tribune, September 2nd, 2023.
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