Thar coal to replace imports

Centre, Sindh will build rail track to supply local coal to imported coal-based plants

ISLAMABAD:

The government has planned to run imported coal-based power plants on locally produced Thar coal, following the establishment of a rail track for transportation of the fuel.

Earlier, the Pakistan Muslim League-Nawaz (PML-N) government had set up several imported coal-fired power plants under the China-Pakistan Economic Corridor (CPEC), but it sparked severe criticism. In Sahiwal too, an imported coal-based plant was established, where coal was supplied from different countries.

Now, the federal and Sindh governments plan to build a railway track at Thar for coal supply to even imported coal-based power plants along with industrial manufacturing units.

The supply of indigenous coal will make the country self-reliant and will help curb prolonged outages as the US-Iran war has hampered fuel shipments due to the closure of the Strait of Hormuz.

The issue came up for discussion in a recent meeting of the Economic Coordination Committee (ECC) of the cabinet.

The Ministry of Railways briefed the ECC that the ministry and the government of Sindh were executing a Thar coal rail connectivity project to facilitate the transportation of locally produced coal to power plants and private-sector industries. This arrangement is covered by the provisions of a memorandum of understanding (MoU) signed between the Ministry of Railways and the government of Sindh, followed by a joint-venture agreement.

The ministry pointed out that the Executive Committee of the National Economic Council (Ecnec) had approved the Public Sector Development Programme (PSDP) project titled "Thar coal rail connectivity with the existing railway network including last-mile connectivity with Port Qasim" for efficient and effective utilisation of indigenous Thar coal reserves.

The project is aimed at facilitating the provision of Thar coal not only to the independent power producers (IPPs), currently running on imported coal, but also to industries such as cement, urea, steel, etc across the country.

The Ministry of Railways further apprised the meeting that as part of the joint-venture agreement, the project would be equally funded by the federal government and the government of Sindh. The federal government will provide 50% of the total project cost from the PSDP portfolio and the remaining 50% will be funded by the government of Sindh through its Annual Development Plan on an equal matching and timely basis to avoid cost overruns, delays and contractor claims. The joint venture has already been signed by both the parties.

The ministry said that in line with the agreement, it had allocated Rs2 billion through the PSDP for the current financial year 2026-27. Correspondingly, the government of Sindh transferred funds to the federal government account-I for the project.

However, a budgetary cover in the shape of a technical supplementary grant was required for the utilisation of these funds. The proposed supplementary grant of Rs10 billion was needed only as a budgetary cover for funds already provided by the Sindh administration and, therefore, it did not entail any fiscal burden on the federal government.

Officials say the cost of electricity will go down if imported coal-fired power plants are run on indigenous coal. Even industries like cement companies will get a cheaper fuel for their manufacturing plants.