Thar Mine Expansion Plan Hinges on Resolution of CPEC Phase-1 issues

The recently approved “Phase-III Thar Coal Mine Expansion Project” may face challenges in attracting investment due to unresolved issues of the sponsors of ongoing CPEC Phase-1 projects.

Till the resolution of outstanding issues, the government will find it difficult to create forward linkages for the use of coal beyond power sector, sources said.

It may be noted that in October, the Sindh government had approved the expansion plan for annual extraction of 12.2 million tons of coal. The project, envisioned to be completed by mid-2023, will reduce the cost of indigenous coal to $27/ton to make it the cheapest fuel source in Pakistan.

Terming the expansion of the coal mine at Thar as great news for Pakistan, analysts said, “It will result in import substitution, reduce reliance on costly imported fuel sources, conserve precious foreign exchange, while also enhancing energy security.”

Ammar Khan, an economist said, “The ongoing uncertainty about renegotiation of contracts with IPPs setup under CPEC, bureaucratic hurdles and the overall hostile environment in the power sector will pose a challenge to attract financing for further expansion of the coalfields at Thar.” He said, “The government cannot give a clear signal to CPEC investors, which has hurt their confidence and marred progress on the second phase of CPEC. Even though the agreements were made during the tenure of previous government, it is important for Pakistan to honor the contracts and give the promised return of equity to these investors, going against such a promise would heighten sovereign risk and create more problems.”

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