Ahmed Khan Malik

Pakistan is projected to witness a 19% rise in the electricity demand from 2025 through 2030. However, increased reliance on the imported energy sources has taken a toll on the country’s economic outlook. In contrast, Thar coal stands as the cheapest baseload fuel available to generate 100,000MW power for the next 250 years, reports WealthPK. In spite of its promising potential, the Thar Coal Project currently faces a significant challenge – incomplete payments. The mining company has been facing this situation since the second quarter of 2022. Although certain payment portions were disbursed in 2023, the disbursement ceased in the last three months, exacerbating the issue. The biggest challenge for the Block-II project is to pay off more than $43 million in debts. The contractors who run and maintain the mine need $10 million every month to keep it working without problems.

This calls for the government to act quickly. "If the critical $10 million per month payments are not cleared, the mine operations are likely to be halted, which, in turn, will impact the power generation of Thar- based IPPs, who currently are the cheapest energy producer in the country," said Yousuf M Farooq, Director Research at the Chase Securities. The government has been focusing on using our country’s own resources to cut down on imports, which is commendable. But the government could do more to help and solve the problems that the Thar Coal project is facing. “The project's transformative impact on energy stability and our economy underscores the critical importance of promptly resolving any outstanding dues, ensuring seamless mine operations and sustaining the momentum of this pivotal initiative,” he said. “However, this projection could be jeopardized if the government does not clear the outstanding payments.

The mine company owes the Chinese contractor dollar-denominated payments under the O&M head which are critical to manage the mine expansion phase III," Yousaf warned. Thar Coal Block-II currently contributes a substantial 1,320MW electricity to the overall 2,640MW power generated by Blocks I & II combined. The consequences of inaction extend beyond the immediate halt of mining operations. The mine stands as a critical asset on Pakistan's energy landscape, testifying to its potential to reshape the nation's power dynamics. The new government needs to pay more attention to this serious issue and make sure it stays viable. Otherwise, these coal-based power plants could shut down and cause long power cuts, which would hurt both the consumers and the industries. Immediate action is required to secure mine operations by addressing the foreign payment issue. Failure to do so not only risks halting a promising and indigenous energy source but also jeopardizes the country's energy security and economic growth.

Credit: INP-WealthPk