Experts Stress Shifting to Coal for Energy Needs

Power sector experts have emphasised upon Pakistan to push harder for utilisation of lignite – an economical alternative to imported furnace oil and RLNG (re-gasified liquefied natural gas) – as it is crucial for the country’s ambition to achieve higher economic growth through industrialisation.

Besides industrialisation, provision of electricity to domestic consumers by using local coal reserves could serve the purpose of generating cheap electricity and curbing the ever increasing circular debt in the power sector, they added. They were of the view that the incumbent coalition government, led by Prime Minister Shehbaz Sharif, inherited fiscally unsustainable circular debt of nearly Rs2.5 trillion and lofty subsidies on energy prices, as well as re-surging blackouts despite surplus generation capacity. Electricity at current price is not affordable for businesses and residential consumers.

According to the government, the electricity generation cost rose by over 66% in March compared to a year ago because of the surging global energy prices.

The generation cost has surged 66.2% to Rs9.22 kWh in March this year from Rs5.55 kWh a year ago owing to spike in imported fossil fuel prices.

“Pakistan should now focus on local coal reserves for power generation as an alternate to imported fuel and coal given that its cost is much cheaper than the imported coal,” emphasised Sino-Sindh Resources Deputy CEO Chaudhary Abdul Qayyum.

Talking to The Express Tribune, Qayyum said that the local coal prices were not sensitive to international price fluctuations.

“Local coal at Thar is available for as low as $40 per ton and with rise in mine scaling, its prices will fall further to $30 a ton,” he pointed out.

“The best thing is that the government has to pay the price in local currency.”

Currently, around 16 million tons of coal is being imported by Pakistan to operate four power plants, Qayyum said adding that if these plants had been running on local coal, massive amounts of foreign exchange could have been saved by the country besides generation of cheap electricity.

He underlined that the recent commodity cycle had witnessed imported coal prices going up to $420-470 a ton from $100-120 a ton, making imported coal even more expensive than residual fuel oil (RFO) for power production.

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“The coal prices in the international market currently stand at $327 a ton,” he mentioned.

Apart from generating electricity, the local coal should now be used to manufacture fertilisers “as our natural gas reserves are depleting and in a few years, it will be hard to operate fertiliser plants on local gas”, Qayyum pointed out.

“Using RLNG will further boost fertiliser prices, thus creating food security issues,” he added.

“In Pakistan, Thar coal is the cheapest indigenous energy resource and its 175.5 billion tons’ reserves have the potential to produce over 100,000 MW of electricity over the next 30 years,” he noted.

As per the experts, Thar coal could provide the country with much-needed strategic energy security and affordability required for industrial and economic revival.

“It is a well-established fact that indigenous coal alone can help Pakistan save foreign reserves and produce sufficient power for the nation,” Pak Oman Asset Management Chief Investment Officer Saif Ullah Kazmi remarked.

“Thar Coal is the solution to Pakistan’s growing energy crisis and unaffordable electricity prices,” he said.

He held the view that the over-dependence on imported-costly resources amid supply crisis for power generation had only proved bad for the country by creating supply and demand gap, thus significantly contributing to the country’s ever-expanding current account deficit.

Kazmi underlined that Engro Powergen Thar plant was producing cheaper electricity than other imported coal-based plants, ie Rs3.62 kWh.

On the flip side, cost of power production through imported coal by Hubco Coal Power plant was at Rs12.08 kWh, Lucky Coal at Rs12.89 kWh, Port Qasim Coal Power plant at Rs16.82 kWh and Sahiwal Coal Power plant at Rs30.48 kWh, he added.

“This shows how reliance on local resources can help Pakistan bring down its energy import bill, while giving a multitude of benefits like cheaper electricity and arresting the outflow of foreign exchange reserves among others,” Kazmi maintained.

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