Soaring energy costs stall growth at 0.29%

Thar coal investment to alleviate pressure, Nepra report reveals

LAHORE:

The National Electric Power Regulatory Authority (NEPRA) has disclosed that high electricity costs were one of the contributing factors to the decline of the economic growth rate to a mere 0.29% in the financial year 2022-23.

According to NEPRA’s State of the Industry Report 2023, the high cost of electricity in Pakistan has emerged as a critical challenge affecting all segments of society. The report states, “Besides domestic consumers, the high price of electricity has had a major impact on the commercial, industrial, agriculture, and services sectors.”

NEPRA revealed that the increasing cost of fuel along with the rupee devaluation and many other factors are the reasons behind the higher cost of electricity in the country. “Pakistan heavily relies on imported energy resources such as coal, oil, and gas. The devaluation of the rupee leads to higher import costs, directly influencing electricity pricing and resulting in increased tariffs for consumers,” states the report.

Thus, the report mentioned, from an economic perspective, nuclear and Thar Coal-based plants stand as the most viable options for baseload power, necessitating concerted efforts towards further developing Thar Coal mines and associated infrastructure such as railways.

It is worth adding here that Thar coal power plants at their peak load contribute approximately 10% to the energy sector and if this share is further increased to 15-20%, electricity prices will significantly be relieved.

“This situation calls for increasing dependency and exploiting local coal resources,” said Yousuf M Farooq, Director Research at Chase Securities, adding that Thar power plants are the most cost-efficient power producers in the country due to the indigenous Thar coal.

“Thar coal’s per-unit cost comes around Rs5-7/kWH compared to Rs15 to 25/kWH of imported coal,” he said.

“Pakistan is 50 years late in the sector. What is needed to exploit Thar’s potential is that the government of Pakistan creates some kind of sovereign fund or instruments with the central bank to facilitate investment in Thar coal,” he said.

He said that coal mining is a capital-intensive and high-cost industry. Global financing is almost extinct now, so public-private partnership is the way to go to get financing locally.

“To unlock Thar Coal’s full potential, the establishment of a sovereign fund and the promotion of public-private partnerships are proposed, emphasising the urgency of strategic investments to propel Pakistan towards energy self-sufficiency and mitigate the adverse impacts of the ongoing energy crisis,” Farooq added.

Published in The Express Tribune, March 7^th, 2024.

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