The Pakistani Spectator

Coal has always been a dirty four-letter word in our power vocabulary. Reluctantly and only recently, have the policy makers been forced to look at indigenous coal as a serious power generation option. Contrary to popular perception, coal not oil is the single largest source of global energy.

Of late gas fired power generation is also being promoted in tandem with oil. Ironically the same was not done when we had plentiful gas reserves. Now that we might have to import it, the policy makers have suddenly woken up anew to its benefits. Share of gas in the IPP’s energy generation has actually fallen since 2004 from 75% to 56% due to shortages.

Pakistan’s rivers have (or had) the potential for generating 40, 0000 MW of cheap hydel power. Presently we are facing a severe water shortage due to the effects of global warming and the construction of up stream dams like Baghliar and Kishan Ganga by India in violation of the Indus Water Treaty. It is ironically now that we hear aggressive hyperbole advocating construction of mega dams for hydel power generation. Apart from being rife with political connotations does our recent telemetry of the Indus River System support these grandiose schemes? Likewise with the ever-spiraling oil prices, relying on indigenous coal is the only medium to long-term solution to our energy and economic woes.

The world generates 38% of its power from coal. Germany, USA, UK, India and China generate more than 50% of their electric power from coal. Australia, Poland and South Africa are dependent upon coal for more than 80% of their energy needs. Indonesia generates 93 per cent of its electricity from coal. Pakistan with coal deposits of 185 billion tons, astoundingly, does not generate even 1% of its electricity from coal.

The only coal based power generation plant of any significance in the country (with an installed capacity of 150 MW) is Lakhra Power. For most of its long chequered history, the plant has either been closed or has operated at less than 50% capacity utilization.

Thar Coal Field in Sindh, with Lignite–B (Brown Coal) deposits of 175 billion tons makes up for 94% of our total coal reserves. It is spread over an area of 9100 square kilometers in Tharparkar. Only 350 square kilometers, 3.8 % of this vast coalfield has been geologically investigated which verified deposits of 12 billion tons. This itself is sufficient to generate more than 40,000 MW electricity for decades to come. Lignite-B is hazardous to stack and does not lend itself to easy transportation. Such deposits, worldwide, are considered ideal for mine mouth power generation.

It was in 2001 that the Thar Coal Task Force was formed, headed by President Musharraf himself. Rheinbraun of Germany, specializing in Brown Coal mining to support mine mouth power generation was engaged. They were supposed to carry out a Thar mining bankable feasibility to support a Power Plant of 1000 MW capacity. The fate of this report on which up front tariff for coal based power generation was to be based, remains a mystery. Without a credible Bankable Feasibility no international investor of merit will show interest in Thar coal.

In the absence of a credible Power Policy and the aftermath of the Hubco tariff fiasco; international power generation companies were wary of doing business with Pakistan. The only country willing to help was China. Lt Gen Ghulam Ahmed (may his soul rest in peace) the then COS to President Musharraf was instrumental in spear-heading (behind the scene) the Thar initiative and engaging the Chinese at the highest level.

With a request to the Chinese Prime Minister himself, the response was immediate. Within no time, the head of the Shenhua Energy Group, the largest coal mining state-owned enterprise in Mainland China and the second largest in the world, arrived in Pakistan. He was personally heading a team to evaluate Thar Coal Field’s potential for power generation.

Shenhua owns and operates coal based mine mouth power generation assets of over 10,000 MW in Mainland China. The Group Chairman enjoys the status of a Vice Minister and had been personally instructed by the Chinese Premier to do everything possible to help Pakistan’s Coal Power Generation. This visit commenced with signing of a letter of intent.

Within months an MOU was signed between Shenhua and the Sindh Government whereby the former agreed to incrementally set up a 900 MW mine mouth coal fired power plant initially on a Build Own & Operate (BOO) basis. The Chinese also undertook, at their own expense, to first establish a Thar mining feasibility by carrying out a detailed geological investigation of a coal block allotted to them. This would then form the basis of an integrated mining and power generation feasibility and viable tariff negotiations. The entire project was to be financed by the Chinese themselves; all they wanted was a fair and viable tariff.

It was then that the usual detractors came into play. WAPDA insisted that the Chinese build the Thar/national grid power transmission at their own expense. The Ministry of Water and Power balked at providing adequate water supply at site. To complicate matters further the Ministry of Petroleum and Natural Resources started lobbying for federal control of the Thar Coal Resource itself. The Pakistan Mineral Development Corporation started putting down strip mining and came up with alternate suggestions like In-Situ Gasification of Thar Coal; at best a commercially un-proven nascent technology. These were some of the many convenient impediments that started cropping up ever so aggressively to sabotage this initiative of national import.

Immediately after signing the MOU, more than 150 Chinese arrived to carry out detailed geological investigations. Their coal drilling rigs, sampling equipment and machinery arrived at Karachi port as temporary imports (exempt from taxes as they would be re-exported after completion of the project). Despite earlier assurances, Pakistan Customs refused clearance till import duties and taxes were paid. Mr Shaukat Aziz, our ‘economic czar’ and the then Finance Minister was not exactly helpful in the situation. An otherwise gladiatorial General Musharraf personally heading the Thar Task Force seemed powerless as ultimately the Shenhua fiasco proved. The clearance issue was only resolved when the Chinese displeasure was conveyed to the very top through our then ambassador to Beijing, Riaz Khokhar.

Working round the clock, the Chinese carried out the technical and commercial evaluation in record time. Shenhua was ready and more than eager to build the integrated mining and power generation complex at a guaranteed power tariff of 5.75cents/kWH. Negotiations started between Shenhua and the Private Power Infrastructure Board (PPIB) and later with NEPRA ended in a stalemate as NEPRA in its own wisdom refused to go above 5.34 cents.

In the mean time a newly elected Government took over in Sindh. The Thar Task Force was no longer in charge. The new Sindh Government having other priorities, the Thar Coal Initiative literally came to a grinding halt.

For more than two years Shenhua desperately tried to negotiate a reasonable tariff with the ‘power barons’ but in vain. Negotiations were deliberately sabotaged by interest groups who viewed coal generation as an infringement on their exclusive domain.

A new but highly flawed power policy called Power Policy 2002 was implemented by the incumbent government in 2003. An utter failure, not a single megawatt was added to the national grid under this policy in the last about nine years. The corner stone of this policy was stripping WAPDA of its self-power generation mandate. The flawed privatization of KESC too was a fallout of this policy. The list of failure and anomalies is too long to pen here.

It also put paid to all hopes that Shenhua might have had to set up the Thar Coal Power Plant. In terms of this Policy the special dispensation allowed to Shenhua in that they were specially invited and given 52 square miles in the Thar Coal field to set up mine mouth generation became invalid. PM Shaukat Aziz had the effrontery to point this out to the Chinese in a televised press conference. Shenhua Group was told to stand in line like everyone else and take part in competitive bidding for setting up a coal based power plant in Thar as and when the Government got around inviting such bids.

The Shenhua Group packed up and left. With them went all hopes of Thar coal based power generation. Nine years later the Federal Government has yet to come up with an up-front acceptable power tariff for coal. Meanwhile the costs have escalated and even 11 cents is no longer viable. The minimum up front coal tariff recently demanded by the Sindh Government is 11 cents.

In its profound wisdom the Federal Government has recently decided to delink Thar Coal Mining and Power Generation and has formed Thar Coal Mining Company. God help us all! It has been reported that “President” Asif Zardari will visit China on September 9. Instead of starting from scratch Shenhua should be persuaded to come back and a workable tariff offered to them. As for their going back in the first place, needless to say, no heads will roll in a powerless Pakistan.

By Mir Adnan Aziz