Restrictions on Letters of Credit (LC) are taking a toll on the economy, particularly on crucial needs such as power generation. The latest development is that coal mining from Thar Block II may be impacted by LC restrictions.
Sindh Engro Coal Mining Company (SECMC) is unable to sustain its mining operations due to critical equipment stuck at the port and non-payment to its Chinese contractor, China Machinery Engineering Corporation (CMEC).
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SECMC owes CMEC $60 million for coal mining in Thar Block II, but LC restrictions have prevented them from clearing their dues since May 2022. Despite a letter from Sindh’s Power Minister, Imtiaz Sheikh, the issue has not been addressed.
CMEC has warned that Mine expansion for Phase III may be significantly hampered, which could result in the discontinuation of a significant source of cheap baseload fuel option for power generation.
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In March 2023, Thar Coal provided 14.74% of power generated with a per-unit fuel cost of about Rs7.06, compared to hydel’s 22.9% and RLNG’s 20.4%, which cost Rs24.31 per unit fuel cost. Thar Coal Block II currently produces 7.6 MTPA of coal, which is used to generate 1320 MW of electricity. With Phase III expansion, this will reach 12.2 MTPA. NEPRA reports that the total electricity generated using coal is 1333.514 GWh, with 1284.802 GWh generated using Thar Coal and 48.71252 GWh using imported coal.
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Experts believed that as we approach the summer season and power demands increase, any disruption to coal mining operations may cause a severe power shortage. This could force existing power plants to shift to imported coal instead of indigenous resources, putting further strain on our dwindling forex reserves.
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They are warning that the government’s inaction may lead to a catastrophic situation unless immediate attention is given to resolving this issue. At present, it’s a waiting game.
