INTERVIEW: AHMED BAKHSH NAREJO, DIRECTOR GENERAL SINDH COAL AUTHORITY

"WILL DEVELOP COALFIELDS WITH OR WITHOUT FOREIGN FUNDS"

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
May 24 - 30, 20
10

Geological Survey of Pakistan sent attention-garbing signal to the government corridors as well as across the bellwethers of petroleum production in the world when it came up with news in late 80s that large deposits of coal reserves were lying under the deserted plains of south-eastern part of Sindh. Almost thirty years have elapsed since then, however that opportunity of flourishing the economy of Pakistan on the back of coal-driven growth unfortunately could not be availed to its full. There are sparsely works being carried forward to utilise the coal reserves that are confirmed by various reconnaissance done by local and international experts at more than 175 billion metric tons in the coalfields of Thar, Badin, Indus East, Jhimpir, Sonda-Jherruk, and Lakhra.

The coal deposits these coalfields possess can meet the energy requirements of the country for many years to come. Besides, coal reserves if extracted as they are can add substantial numbers in the export earnings of the country. An independent analyst says that these fields have deposits of diamonds, citing an example of discovery of World's renowned diamond Koh-e-Noor in the coalfield of Hyderabad Decan-India.

In different periods, governments of Pakistan geared towards developing these fields particularly the largest among them Thar coalfield that has an estimated coal deposits of 175 billion metric tons with a total area of 9,000 square kilometres-estimated coal reserves Badin (1.75 billion tonnes), Sonda-Jherruk (7.6 billion tonnes), Jhimpir-Metting (0.16 billion tonne), and Lakhra (1.33 billion tonne).

But, the interest either often faded or succumbed to political instabilities led by the uncalled-for change in governance systems within a short span of time and most importantly provincial-federal spats over resource sharing.

Optimists attributed the over-delayed developments of coalfields in Sindh to fiscal constraints that by design look big when a project wants a long time to be materialised. In this case, a large chunk of funds is required in upgrading the untouchable infrastructure of the Thar first of all before the coal can see daylight.

In 1993, government had formulated Sindh Coal Authority (SCA) to develop four main coalfields in Sindh and underpinned its structure through the passage of SCA Act in next year. The situation could not be smoothened even though and leading problem maker remained 'who owns what'.

Recently, the SCA was again restructured to ease tensions between centre and the province. Its restructuring brought with it a 12-member board of governors comprising four MPAs and two MNAs from Sindh, two non-government members, and four bureaucrats including Director General Sindh Coal Authority. The authority could not desist from falling in to a political mess when a question of nomination of two MNAs raised its heads. Their induction was said to be essential to bring the authority in to action. It is said until the matter is resolved the authority cannot proceed with its mandate to authorise works on coalfields across the province. Similarly, legal framework is also essential to support such a long-term development. Is it major hurdle in the development of bonanza coalfields of Sindh or are there some other hurdles? Last week, Ahmed Bakhsh Narejo, Director General Sindh Coal Authority, Government of Sindh shared his views with Page during an interview about the status of developments in Thar coalfield and major problems facing the progress of exploration of coals as well as enhancing the energy values of underlying resources.

SCA is a provincial body authorised to take all decisions pertaining to coal mining and power generation with the consultation of different federal departments.

Ahmed Narejo holds the key position in SCA and therefore keeps an eye on the ground realties in the coalfields. His determination to develop coalfields prevailed upon the 1-hour session, reflecting also both federal and Sindh governments' resolves to take out some effective outcomes from the coal resources. He was outspoken in his statements. He conceded the government's fiscal constraints and reiterated essentiality of foreign funds for making the coal projects sustainable. But, he emphasised the government is steadfast in developing coalfields with or without foreign funds.

PAGE: SO, WHAT IN PRACTICAL TERMS IS GOVERNMENT DOING? HAS IT ALLOCATED ANY SPECIAL DEVELOPMENT FUNDS FOR THAR COAL DEVELOPMENT?

DG: No special fund has been allocated for it. However, the government earmarked Rs230 million for infrastructure developments mainly in Thar areas in the current Annual Development Programme. Project Management Unit of the provincial government is carrying out infrastructure developments in the areas. Recently, a Rs972 million airport construction agreement was signed between SCA and Civil Aviation Authority. The airport will be constructed at Islamkot. Heavy investments are needed to build infrastructure of highly underdeveloped regions of Thar. Of late, federal government approved Rs8 billion 100-megawatt power plant to be established in Block 5 of Thar coalfield. Let me tell you, this is a clean coal technology initiative first time introduced in Pakistan for utilisation of embedded coals as it will process out gas from underground coal. A steering committee headed by Dr Samar Mubarakmand has been set up for the coal gasification project.

PAGE: WHAT SORTS OF INVESTMENTS ARE NEEDED INITIALLY?

DG: Investment needs are varied ranging from water networking to roads. We are trying to supply fresh water to every households of Thar accounting for approximately 2 million population. We have already setup reverse osmosis plants in 29 villages. For other 29 villages, expressions of interests have been invited. To meet huge demand of water in coalfields, we conceived a water pipeline from Chottari Dam to the field. PC-II of this project has been approved.

PAGE: IT SEEMS THE GOVERNMENT ALONE CANNOT TAKE ON SUCH CAPITAL-INTENSIVE PROJECTS. HAS THE FEDERAL GOVERNMENT SOUGHT ASSISTANCES OF INTERNATIONAL FINANCIAL INSTITUTIONS FOR THE DEVELOPMENT OF THAR COALFIELD AFTER REFUSAL OF THE WORLD BANK TO RELEASE LEFTOVER COMMITTED FUNDS TO THE GOVERNMENT?

DG: The coal development project is capital-intensive. As far as the withdrawal of the World Bank is concerned, it is important to understand the nature of the agreement between the bank and the government of Pakistan. The World Bank struck an agreement with the government of Pakistan to provide 30 million dollars for several studies on social aspect, legal framework, etc of coalfields. Of that, it has released 2 million dollar but halted further provisions for reasons best known to it. We want to develop coal with clean technology. Government has apprised the World Bank that its exit imperils the coal developments. I hope the bank will restart the financial assistance. Investors also resort to international lenders. The World Bank recently signed accord with South Africa to provide funds for coal development. The bank is most likely to come back.

PAGE: ACCORDING TO SOME MEDIA REPORTS, THE WORLD BANK HAD ENVIRONMENTAL CONCERNS RELATED TO QUALITY OF COAL. WHAT DO YOU SAY?

DG: The coal deposits in Thar Coalfield are if not best then equal in quality comparable to coal reserves in other countries world over. The same lignite is being used in several developed as well as developing economies. India and China are utilising it 30 to 70 per cent while Germany, South Africa, and USA are also exploiting lignite.

PAGE: CONSIDERING THE SLOW PACE ON COALFIELDS, MINES AND MINERAL DEPARTMENT HAS SET FEW BUT OVERAMBITIOUS TARGETS SUCH AS TO INCREASE SHARE OF COAL IN THE COUNTRY'S ENERGY MIX TO 19 PER CENT BY 2030 AND TO LIFT COAL PRODUCTION FROM 4 MILLIONS TO 20 MILLIONS TONS BY 2015. HOW DO YOU SEE IT?

DG: Given the available resources, the progress should not be termed as slow. Federal government is funding coal gasification project that will provide 50-megawatt electricity by 2011. Feasibility studies of eights blocks in Thar coalfield have been completed while we have allocated five blocks after exploration and assessment of coal resources to different local and international investors. SCA entered in to a joint venture with Engro Power Gen Pakistan to produce electricity from coal in Block-II. The expected date of completion is 2015-16. Another agreement was signed with Cougar Energy (UK) for establishment of underground 400-megawatt coal gasification power plant. MOU has been signed with Bin Daen Group, UAE for the development of coalmine and installation of 1000-megawatt power plant. A subsidiary of UK group has started feasibility study on Block VI and will complete by yearend. It is a 300-megawatt power project. Sindh government is considering JV proposal of Al-Abbas Power Gen as well. We offer many incentives for investors for early completion of financial closes such as 20 to 20.5 per cent IRR to firms, exemption of corporate taxes for 30 years; zero per cent custom duty on import of cola mining projects; and withholding tax exemption for shareholders on dividend. Both federal and provincial governments are keen to develop the Thar Coalfields as soon as possible.

PAGE: WON'T THERE BE A PROBLEM OF INSUFFICIENT SKILLED WORKFORCE?

DG: We will tackle the shortfall certainly, as we are planning to set up vocational training centres in the areas near to coalfields. We are establishing one such centre in Mitthi with a total cost of Rs600 million. A network of institutions will supply skilled workforce to meet the needs.