Private firm continues to illegally occupy coalmine at Lakhra

The company was given a contract to mine coal and set up a power plant, but has failed to do the latter

KARACHI: Despite allegedly reneging on a promise to set up a mine-mouth coal-fired power plant in Lakhra, the Fateh Group, a small industrial conglomerate, is being allowed by the Sindh government to continue extracting coal from an 8,000-acre state-owned coalfield to sell on the open market, allegedly with the backing of local politicians who have prevented the provincial government from taking action against the company.

Fateh Group, which was awarded a contract in 2005 to manage the coalfields under the promise that it would set up a 200 megawatt power plant that runs on coal, has been mining between 800 and 1,000 tons of coal every day and selling it on the open market, but appears to have made no moves to set up the power plant it promised the government. Yet despite an apparent violation of its contract, the Sindh government appears to be taking no action against the company.



“Officials from the Inspectorate of Mines patrol that area round the clock. They can take action against these illegal mines that are operating in broad daylight,” said one official familiar with the matter.

When contacted for comment by The Express Tribune, the Sindh Mines Chief Inspector Rafique Chandio said, “We know that it is illegal activity because the coalfield is dedicated for a power plant, but cannot take action because the matter is now under litigation. The government had issued notices to Fateh Group [in 2011] warning to cancel their lease because they allegedly violated the agreement, but they have gotten a stay order from a court,” he said.

Sources said that, two years ago, the Sindh government tried to send the Jamshoro police to stop the mining activity, but were prevented from taking action after Sindh Assembly member Faqirdad Khoso and Malik Asad Sikandar, both from the Pakistan Peoples Party, intervened on behalf of Fateh Group. Khoso, who belongs to the area, however, denied his involvement in the matter.

The company, however, disputes this account and blames the Water and Power Development Authority (Wapda) for not fulfilling its end of the bargain. “We submitted a feasibility report to set up a coal-fired power plant after consultations with Wapda, but it was rejected by the Private Power Infrastructure Board (PPIB) [the government body that licenses independent power producers (IPPs)],” Ataur Rehman, legal advisor to Fateh Group told The Express Tribune. The company also alleged that NEPRA never set a power tariff for the coal-fired power plant and so it was not able to invest in the plant.



Government officials allege that the feasibility report was unprofessional and not adequate. “They submitted a feasibility report conducted by unskilled persons and was not up to the mark to set up a power plant,” said one additional secretary in the Sindh energy department who declined to be identified.

Rehman claimed the government did not give them enough time to address the PPIB’s objections. However, when asked why Fateh Group was continuing to mine coal despite not being able to set up the power plant, Rehman declined to comment, except to say that the case was currently in court.

Background

A total of 16,000 acres in the Lakhra area of Jamshoro, now known as the Jamshoro Khanot Coal Mines, was dedicated for coal-fired power production in 1990 by then-Prime Minister Benazir Bhutto, when the Executive Committee of National Economic Council (ECNEC) approved the idea and a semi government company Lakhra Coal Development Company (LCDC) was formed. LCDC is 50% owned by the Pakistan Mineral Development Company, a federal government entity, 25% by the federal Water and Power Development Authority and 25% by the Sindh government.

The company was asked to set up mechanised mines and two power plants. LCDC started work on 8,000 acres of the land and set up the 150 MW Lakhra Power Plant. The other half of the land was given back to the Sindh government, which in 1995, tried to lease out the land to the private sector for power infrastructure development.

The land was leased out to Smith Associate Power and Mining Company in 1995, but their lease was later cancelled after they failed to deliver on their promises. During Musharraf’s term in office the provincial government gave the land to the Fateh Group in 2005, which has similarly failed to set up a power plant.

Irfanullah Marwat, who was mines and mineral development minister in 2005, told The Express Tribune that he had revoked the lease soon after the company failed to set up a coal washing plant, which was part of its lease conditions. “This is lignite coal, so a washing plant was essential to clean it and improve its quality,” he said. “The Fateh Group had attempted to import a coal washing plant from Ukraine but failed to get one. After a year, we cancelled their lease. Later, the PPP-led government again allotted the land to the same company.”

Fateh Group’s legal advisor claimed that the company had been able to procure the coal washing plant, but the government’s cancellation of their lease prevented them from setting up the plant.

Yet even officials who worked in the PPP-led government say they had cancelled the lease. Aftab Khokar, who worked at the Sindh Director General of Coal Mines and dealt with this case on behalf of the Sindh government, told The Express Tribune: “The coalfield lease issued to the Fateh Group has been cancelled since 2011 because they did not live up to their agreement. This is government property, but the company is not handing it back to the government and still extracts the coal from mines,” adding that the case against the company has been pending in courts for a few years.

LCDC lease

Meanwhile, the Sindh government has cancelled the lease of the Lakhra Coal Development Company (LCDC), which is the only company in Pakistan that excavates coal to run a power plant. The order has been issued by provincial energy department.

Sources suggest that the provincial government intends to allot the 8,000 acres of LCDC land among private contractors and companies who already sell coal in the open market. A copy of the cancellation order, made available to The Express Tribune, addressed to management of LCDC said, “You are violating the agreement for not having mechanized coal mining and also sell the coal in open market, therefore government cancels your lease.”

A senior LCDC official said that they have dedicated land for the coal power plant that now generates only 30 MW. “We used to excavate around 800 tons and supply it to the power plant. Since it has reduced its generation capacity from 150 MW to only 30 MW, the board of directors has decided to sell the coal in open market because the mining activity must continue; otherwise the entire system will collapse.”

Despite many attempts to contact them, Sindh Energy Minister Murad Ali Shah and his secretary Agha Wasif Abbas did not respond to requests for comment.

Published in The Express Tribune, March 3^rd, 2015.