Jan 21 - 27, 2008

For decades Pakistan has been facing electricity crises and the situation has not improved despite establishment of a number of Independent Power Plants (IPPs). Government policies have proven to be the biggest hurdle in establishing power plants based on indigenous coal.

Use of gas as fuel in thermal power plants at the best can be termed "Burning dollars" because a number of value-added products i.e. fertilizers can be produced from it. Besides, Pakistan has enormous hydel power generation potential and availability of high quality coal in trillions of tons. It seems that certain quarters are not in favor of using coal for power generation.

It is not a grudge but statement of the fact. More than 15 years ago, when Benazir Bhutto was Prime Minister, she performed ground breaking ceremony of a coal-based power plant in District Tharparkar of Sindh. However, neither this one nor any other plant could be established in the country. One of the coal-based power plants established WAPDA at Lakhra, in Sindh also remains in shamble.

According to people privy to inside information there seems to be a dispute on the ownership of the coals reserves of Tharparkar. While Sindh provincial government considers its prerogative to develop Thar coal, the federal government wants to take control of these reserves and exploit the potentials. Since granting permission for power plants and approving power purchase tariff is domain of federal government the heat burn continues.

Realizing the dream of power generation from Thar coal is the perfect example of "egg or chicken first" saying. Sindh government has not been able to allocate required amount for the development of infrastructure in coal rich areas because there is no immediate use of coal. Entrepreneurs are not willing to initiate construction of coal-based power plant because the mining of basic raw material has not started.

Some time back Chinese investors also showed keen interest in coal mining as well as establishing mine-mouth power generation plant based on Thar coal. However, various attempts on the lives of Chinese engineers forced them to review their plan. Chinese may have not abandoned the project but implementation is being delayed.

Recently, the National Electric Power Regulatory Authority (Nepra) has submitted its final report on the 1000MW Thar power project to the cabinet division and offers an indicative tariff of 7.8 cents per unit for 30 years. Nepra was directed by the ECC to come up with an upfront tariff on coal-based power projects. After consultations with all stakeholders, including the government of Sindh, Water and Power Ministry and Wapda, Nepra reached the conclusion that it could not offer an upfront tariff in the absence of a bankable feasibility study. The Nepra submitted the indicative tariff based on experiences of India, Indonesia and some other countries.

Moreover, Nepra made it clear that the indicative tariff would not be legally binding and a final rate to the investors would be worked out on the tariff petition to be filed by the project sponsor on the basis of a bankable feasibility study for which the government had issued a letter of interest.

At a recent meeting presided over by the Minister for Water and Power Tariq Hameed, representatives of the Sindh government had proposed 11.1 cents per unit tariff.

The argument of the Sindh government was that normal laws should be set aside for the time being to promote investment and exploitation of Thar coal reserves. The provincial government also contended that since the oil-based power projects were being granted permission with a much higher tariff with an extra foreign exchange cost, Nepra should agree to a tariff for a domestic resource even if its tariff was higher in order to attract investment.

The delayed is attracting criticism because the respective authorities could not agree on the tariff to be paid to the producer. It is more frustrating because a meaningless debate is going on at a time when the country is facing the worst power shortage.

It seems that the respective authorities are least moved by the looming economic disaster. Had they a bit of realization they should have also realized the tariff. It goes without saying that the power generated by thermal plants using indigenous coal is certainly lower compared to imported furnace oil.

The oil import bill, mostly comprising of furnace oil is already having a toll and pushing trade deficit to new highs. The decision regarding coal-based thermal power plants has become more pressing because of crude oil prices hovering around US$ 100/barrel. Is it not amusing that even the rich countries are looking for domestic alternatives like solar energy, windmills and biogas but policy makers are involved in a senseless debate?

Pakistan has millions of tons of coal reserves, a cheap fuel for power generation. There is no dearth of either investors or of appropriate technologies for putting up environmental friendly coal-fired power plants. Regrettably the progress of coal-based power plants has been held up because of disagreements on the tariff to be paid.

The Nepra and Sindh government have come up with tariff ranging from 7.8 cents to 11.1 cents per units but both these are lower compared to a tariff of 14 cents being offered to new furnace oil fired thermal power plants. It would be better if Nepra and Sindh government sort out the difference at the earliest.

The failure in exploiting the coal advantage is costing billions of dollars to Pakistan. If around the globe 25% of total power is generated through coal-based power plants why some of the quarters are opposing it. Till today Pakistan has only a small coal-based power plant even that is not working efficiently. Is there some thing wrong in the Energy Policy or policy planners are bent upon not to let Thar coal to be exploited?