The Government of Sindh (GoS) has sought Finance Minister’s help for opening of LCs and remittances for Sindh Engro Coal Mining Company Limited (SECMC) which intends to expand its mine capacity to 11.2 million tons per annum. Imtiaz Ahmed Shaikh, Sindh Minister for Energy, in a letter to Finance Minister Ishaq Dar stated that Sindh Engro Coal Mining Company Limited has successfully achieved COD of Phase-II mine expansion in September 2022 and despite the challenges posed by COVID-19 and supply chain constraints, the company managed to double its mine capacity from 3.8 mt/a to 7.6 mt/a. Prime Minister during his visit to Thar shed light on the significance of Thar coal and termed it as a “game changer for Pakistan”.
The Minister added that the integrated CPEC project is playing a pivotal role in resolving the country’s crippling foreign exchange challenges. Monthly coal supply from Block-II Thar coal mine is equal to monthly coal imports of approximately $ 55 million (for three IPPs). The Company has also initiated a project to further expand the mine to 11.2 mt/a. This expansion is necessary to convert IPPs currently operating on imported coal to local Thar coal; hence reducing the foreign exchange burden further.
According Sindh Minister for Energy, despite the criticality of Thar coal for the economy of Pakistan SECMC is facing significant delays in the approval of opening of Letter of Credits (L/Cs) and foreign currency remittances, which is putting mine operations at risk. Sindh Government is continuously engaged with banks and SBP for resolution of this issue, but a significant amount is still pending. Sindh Energy Department is also requesting SBP to classify imports related to Thar coal project in the essential items list. In this regard, Sindh Energy Minister sought support of Finance Minister, Senator Ishaq Dar to request SBP to allow monthly quota for SECMC amounting to $ 12 million to meet their import requirement of critical mining equipment, spare parts and contractor payments.
IPPs currently operating on Thar coal will not be able to produce power if mine does not operate due to non-availability of equipment and spare parts. This will force the power regulator to operate IPPs on imported coal, which will result in additional import bill of $ 55 million. Finance Division, in its communication asked Power Division to take appropriate action on the letter under intimation to the former. On April 4, 2023, SECMC through its letter to PPIB again agitated that it is facing difficulties in obtaining approvals from State Bank of Pakistan for opening of Letter of Credits and foreign remittances, which is seriously hampering its mine operations.
Managing Director PPIB, Shah Jahan Mirza in his letter to Executive Director, Exchange Policy Department, SBP noted that delays are resulting in financial implications such as demurrage, liquidated damages and penalties. In case of limited availability of Thar coal these Thar coal-based IPPs with a cumulative capacity of 1,980 MW may opt to utilize imported coal in order to meet power despatch orders; thus imposing a heavy burden on the national exchequer and further reduction in foreign exchange reserves. Subsequently, SECMC has solicited PPIB’s support for facilitation in opening of LCs for critical spares. Furthermore, in order to reduce burden on the GoP in opening of all LCs at once, in current financial situation, SEMC has provided a priority list of opening of LCs to sustain the mine operations.
