Govt to push Chinese plants to switch to Thar coal

The government would ask the Chinese power plants operating in the country to shift to using coal from the Thar region rather than imported coal, and initiate negotiations on re-profiling Pakistan’s energy sector debt during a visit by Energy Minister Awais Leghari to Beijing later this month.

China had set up over $20 billion worth of energy projects in Pakistan. Leghari would be part of a delegation to discuss structural reforms to the power sector suggested by the International Monetary Fund (IMF), which last week agreed on a $7 billion bailout for Pakistan.

“One of the key purposes of going along is the conversion of our imported coal units to the local coal. That would have a huge impact on the cost of energy, of power in the near future. So that is one of the biggest [items on the] agenda,” Leghari said in an interview with Reuters.

Such a transition would benefit the Chinese-owned plants in Pakistan by reducing pressure on Islamabad’s foreign exchange reserves, Leghari said, making it easier to repatriate dividends and offering a better return in dollar terms.

The transition could save Pakistan more than Rs200 billion a year in imports, translating to a decrease of as much as Rs2.5 per unit in the price of electricity, he said. The minister, however, declined to elaborate on the possible talks with China over re-profiling energy debt.

The government is implementing structural reforms to reduce “circular debt” – public liabilities that build up in the power sector due to subsidies and unpaid bills – by Rs100 billion a year, Leghari said.

Pakistani households have been affected by a previous IMF bailout reached last year, which included raising power tariffs as part of the funding programme that ended in April. Annual power use in Pakistan is expected to fall consecutively for the first time in 16 years as higher tariffs curb. REUTERS