INCREASING SHARE OF BALOCHISTAN'S COAL IN ENERGY MIX

SYED FAZL-E-HAIDER
July 13 - 19, 2009

Balochistan is the biggest coal producer in the country yielding more than 2 million tons a year, according to the official sources. Its vast coal reserves can be utilized for energy generation. Coal-based power stations presently utilize about one percent local coal. Need is to increase the share of Balochistan coal in the country's energy mix, as the government has already decided to increase the share of coal in the country's energy mix from 7.6 percent to 18 percent by the year 2018. Steps need to be taken for using Balochistan coal for energy generation purpose.

There is no significant consumption of electricity for industrial purpose in Balochistan, as the province lacks a sound industrial base. The power consumption is largely for domestic purpose. Being the least populous province, Balochistan consumes the least power, as compared to other provinces of the country. According to one estimate, the province's total power needs does not go beyond 1500 mega watts, and the coastal areas get electricity from Iran. On the other hand, Karachi city needs 2500 mega watt of power to continue its industrial, commercial and social life in a normal way. Frequent electricity load shedding in rural Balochistan is affecting the farming community and the agriculture, which is the mainstay for over 75 percent of the local population. According to one estimate, about 229824 hectares of area in the province is irrigated by tub-wells, which have become non-functional due to the frequent load shedding by QESCO.

Balochistan possesses huge reserves of coal at Harnai, Degari, Mach, Ziarat, Chamalang and Abegum. The estimated reserves of all coalfields in the province are 217 million tons. The 60km-long Chamalang coalmines contain coal ranging from high volatile C bituminous to high Volatile A bituminous with a total resource of six million tons.

Chamalang coalmine project is likely to provide jobs to 25,000 people. Nearly 200-250 loaded trucks of coal leave daily for different areas of Pakistan from Chamalang mines in Balochistan. Supply of coal from Chamalang mines in Balochistan started with the first convoy of loaded trucks left for different areas of the country in March 2007. The Chamalang-Mekhtar track had been made operational for heavy traffic enabling coal trucks to go to other areas. The tribal rivalry in the area during the last three decades had obstructed the mining of coal in Chamalang. The Luni and Marri tribes had been at war over the ownership of the mines. The mines were made operational following the tripartite agreement between the Marri and Luni tribes and mine contractors on December 12, 2006. According to a rough estimate, the profit from the supply of coal from Chamalang mines would be worth Rs30 billion per annum.

Coal mining sector in the province needs some tax incentives for its development from the federal government. Federal Board of Revenue should amend income tax rules and allow 100 percent write-off on expenditure incurred on mining operations. Other tax incentives, which may be given to the mining sector include the permission for duty-free import of mining machinery, equipment, and transportation trucks, withdrawal of GST on coal for at least five years, bank loans at three percent interest rate, and the removal of the condition that the depletion allowance should not exceed 50 percent of the total amount invested.

Balochistan produces coal of good quality that can be used for power generation and in different industries for heating purpose. Presently, bricks makers are utilizing over 80 percent of the local production of coal, while the rest are being consumed by cement makers to blend it with the imported coal to reduce the cost of production. In view of the rapidly mounting Pakistan's energy deficit, there is a high need to turn the province's coal-mining sector into a modern mechanized industry. Investment in coalmine sector would not only accelerate economic activities in the province but also save the foreign exchange. The investments can be made for establishing coal-washing plants. Raw coal contains different impurities like sulphur, calcite, clay, rock and shale. This impure coal cannot be utilized in the industry hence impurities must be washed out. For saving energy and cost, there is a need to set up coal washing plants in the province.

The 60km-long Chamalang coalmines contain coal ranging from high volatile C bituminous to high Volatile A bituminous with a total resource of six million tons.

Nearly 200-250 loaded trucks of coal leave daily for different areas of the country from Chamalang. Coal is presently being sold at a price of Rs 4000-4500 per ton. Supply of coal from Chamalang mines started with the first convoy of loaded trucks left for different areas of the country in March 2007. The Chamalang-Mekhtar track had been made operational for heavy traffic enabling coal trucks to go to other areas. According to a rough estimate, the profit from the supply of coal from Chamalang mines would be worth Rs30 billion per annum.

The tribal rivalry in the area during the last three decades had obstructed the mining of coal in Chamalang. The mines were made operational following the tripartite agreement between the Marri and Luni tribes and mine contractors on December 12, 2006. Discovered some 35 years back, Chamalang coalmines could not be exploited due to security reasons. The Luni and Marri tribes had been at war over the ownership of the mines during the last three decades.

About two years ago, a Memorandum of Understanding (MoU) was signed by Balochistan government with a Canadian firm for setting up 50 megawatts coal-fired power plants by utilizing locally extracted coal. Under the deal, Balochistan Power Generation Limited (BPG) and Canadian Everlight Energy Corporation (EEC) agreed to prepare feasibility of the project and submit it to Provincial Thermal Power Board for review. The Board agreed to settle matters relating to tariff and supply of electricity between Quetta Electric Supply Company (QESCO) and these companies after the submission of the project's feasibility report. The companies were bound to spend five percent of their total revenue on development of social sector in the areas where they supply power.