Coal – Pak­istan’s En­ergy Saviour

Enterprise - - Front page - By Ma­jyd Aziz

Pak­istan is blessed with enor­mous nat­u­ral re­sources and hard­work­ing hu­man re­sources. How­ever, what Pak­istan has al­ways lacked is a sense of di­rec­tion, strong lead­er­ship, and sin­cere provin­cial har­mony. The civil­ian hi­er­ar­chies or even the mil­i­tary jun­tas have never se­ri­ously sensed the im­per­a­tive need to at­tain self-re­liance through max­i­mum uti­liza­tion of do­mes­tic re­sources but have al­ways looked up to ex­ter­nal chan­nels to man­age the coun­try’s econ­omy and its in­fra­struc­ture.

This pol­icy has re­sulted in a sit­u­a­tion where on the one hand the na­tion has the re­sources that can pro­vide eco­nomic pros­per­ity but on the other hand there is no po­lit­i­cal will nor is there en­light­ened vi­sion to har­ness th­ese re­sources. Pak­istan is cat­e­go­rized in the list of de­vel­op­ing na­tions with the added supreme ad­van­tage of be­ing in the ex­clu­sive nu­clear club. This po­si­tion is unique but it has brought about dif­fi­cult times for the coun­try, es­pe­cially after the May 1998 nu­clear test. To­day, the na­tion’s eco­nomic progress is hostage to an in­fra­struc­ture sce­nario that is de­te­ri­o­rat­ing, in­suf­fi­cient and in­ef­fi­cient. To­day, the coun­try is fac­ing elec­tric­ity short­age, dwin­dling gas re­serves, and ut­ter ne­glect of wa­ter con­ser­va­tion. To­day, the moth­er­land is be­ing stran­gu­lated by the ex­ter­nally in­flu­enced 3 F dis­as­ters, i.e. food, fuel, and fi­nance. Pak­istan is one coun­try where de­spite fi­nan­cial wizards, prag­matic econ­o­mists, and pol­icy plan­ners the coun­try be­comes sus­cep­ti­ble to for­eign in­flu­ence and is not able to ex­tri­cate it­self from this dom­i­na­tion.

The 1999-2008 era may have been a mini eco­nomic suc­cess story, but the most neg­a­tive down­side had been the gov­ern­ment’s pol­icy to put a break on new power projects. The gov­ern­men­tal hi­er­ar­chy, with all its wis­dom, de­cided in­stead to of­fer its scarce power gen­er­at­ing ca­pac­ity to In­dia, some 3000 MW worth of com­mit­ment. Thanks to the in­de­ci­sion that is the norm in Is­lam­abad’s of­fi­cial­dom, the project was scrapped be­cause the Pak­istani side could not ac­cept the amount of­fered for ev­ery unit of elec­tric­ity to be ex­ported to In­dia.

Pak­istan is at present in a deep po­lit­i­cal and eco­nomic cri­sis. The ef­fects of im­ported in­fla­tion have im­pacted ruth­lessly on the daily life of peo­ple. The es­ca­lat­ing oil prices, the ab­nor­mal in­crease in wheat and rice prices, the fall­ing ru­pee value, the flight of scarce cap­i­tal to UAE and other havens, the saga of the judges, the un­cer­tainty and in­er­tia among the coali­tion part­ners, and the un­con­trol­lable law and or­der sit­u­a­tion have af­fected ex­ports, have been tough on pock­et­books, and have brought the na­tion to the precipice of dis­as­ter. The only peo­ple rolling in money are the stock­bro­kers although they too have faced a mini jolt re­cently. Pak­istan is strate­gi­cally at a van­tage po­si­tion. There is still re­siliency in the peo­ple who still nur­ture the hope that Roti, Kapra, Makan, is not il­lu­sory but it is their des­tiny and that a day would come when it would not just be a slo­gan con­cocted by pseu­doso­cial­ists. How­ever, if this slo­gan is to be a re­al­ity then ef­forts should have been made to achieve this ob­jec­tive. Un­for­tu­nately, Pak­istan has al­ways lacked prag­matic vi­sion­ar­ies. Those who had the vi­sion di­verted their en­er­gies to power-

grab­bing, chi­canery, and mega­lo­ma­nia. Hence, the eco­nomic downslide was never ad­dressed with sin­cer­ity. Thus, the phys­i­cal and so­cial in­fra­struc­ture in this coun­try left much to be de­sired. The qual­ity of life is in the abyss of dark­ness for most of the cit­i­zens.

The fo­cus of the new gov­ern­ment is not much dif­fer­ent than its pre­de­ces­sors. Pak­istan has to sur­vive and this can only be done through ju­di­cious and univer­sal uti­liza­tion of its nat­u­ral and hu­man re­sources. The first and fore­most tar­get should be to de­velop the in­fra­struc­ture so that trade, in­dus­try, and ser­vices are able to func­tion and pro­vide em­ploy­ment. The Fed­eral Board of Rev­enue, as al­ways, stresses on rev­enue gen­er­a­tion and noth­ing else. The fi­nan­cial man­agers of the gov­ern­ment par­rot the grand achieve­ments made by the gov­ern­ment by rat­tling off fig­ures such as forex re­serves, in­fla­tion, and GDP at do­mes­tic and in­ter­na­tional fora, such as at Davos, Baio, and Wash­ing­ton. At the end of the day, the House of Cards falls and all this rat­tling off be­comes an in­ter­na­tional macabre joke. Pak­istan now has to do some se­ri­ous soul-search­ing. It is time to look within rather than wait for dole outs at hor­ren­dous terms or wait for China to park some of its petty cash to boost Pak­istan’s forex re­serves. It is time to take out the shov­els and start dig­ging. It is time for peo­ple in power to look to the fu­ture and trans­form the vain slo­gans into re­al­ity.

It is time to build the in­fra­struc­ture on an im­per­a­tive ba­sis. Pak­istan is fac­ing its worst power cri­sis. Load­shed­ding up to twelve hours per day is now an every­day af­fair. Pak­ista­nis spent over US$ 600 mil­lion this fis­cal year to im­port gen­er­a­tors and UPS. Line losses are unique in this coun­try. Ac­cord­ing to one survey, over a quar­ter of to­tal power gen­er­a­tion dis­ap­pears through line losses, theft, and due to ob­so­lete equip­ment. This is nearly 100 bil­lion kwh units. Pa­thetic and un­man­age­able. The big­wigs in WAPDA, KESC, and the DIS­COs have a damn­care at­ti­tude and the en­su­ing re­sult is this daily load­shed­ding. Pak­istan needs elec­tric­ity. Ther­mal power is ex­pen­sive and the coun­try has to sub­mit to the va­garies of in­ter­na­tional price mech­a­nism. Hy­dro-elec­tric­ity is still hostage to provin­cial dis­trust and is em­broiled in parochial­ism. Al­ter­nate en­ergy, such as wind power, bio-fuel, or so­lar en­ergy is still vic­tim to in­de­ci­sion. The im­me­di­ate so­lu­tion lies in uti­liz­ing coal for pro­duc­ing en­ergy. Pak­istan is for­tu­nate to have one of the world’s largest reser­voirs of coal. The coal re­serves in Thar in Sindh are 184.123 bil­lion tons mak­ing Pak­istan the fifth largest in the world. At to­day’s prices, this is worth over US$ 25 tril­lion. Other re­serves in Sindh are at Lakhra, Jhar­ruck, Badin, and In­dus East. The coal pro­duc­ing ar­eas in Balochis­tan are Duki, Sor Range, Har­nai, Mach, GhamalomgBahlol, and Pir Is­mail Ziarat, etc.

In NWFP the coal pro­duc­ing area is Hangu where re­sources are about 50 mil­lion tons but pro­duc­tion is prac­ti­cally noth­ing. The sit­u­a­tion in the prov­ince of Pun­jab is that there is a po­ten­tial re­serve of be­tween 230-250 mil­lion tons while pro­duc­tion is less than half a mil­lion tons. The coal ar­eas are in the East­ern and Cen­tral Salt range an in Surghar Range. Pak­istan is pro­duc­ing about 5% of its en­ergy from coal. The coal-based elec­tric power gen­er­a­tion is only 1% in Pak­istan while it is 77% in China, 70% in In­dia, 70% in Kaza­khstan, and over 52% in USA. One MW gen­er­a­tion of elec­tric­ity con­sumes about 10 tons of coal per day. If 2000 MW is pro­duced daily from coal, the re­quire­ment per year would be less than 7.50 mil­lion tons. This is just peanuts com­pared to the re­serves in Thar. Pak­istan is los­ing its race ev­ery minute that elapses with­out a decision be­ing taken on coal min­ing, es­pe­cially in Thar. The con­ven­tional wis­dom in Sindh is that the pol­i­cy­mak­ers in Is­lam­abad do not want to ac­cel­er­ate this process as they are bent upon build­ing the Kal­abagh Dam. If this premise is cor­rect, then the pol­i­cy­mak­ers are the worst en­e­mies of Pak­istan. Thar coal and Gwadar Port are two im­por­tant eco­nomic re­sources that could bring about eco­nomic pros­per­ity in the coun­try but un­for­tu­nately both th­ese projects have been sus­cep­ti­ble to ma­nip­u­la­tion and con­spir­a­cies. Pak­istan must de­cide now.

The bick­er­ing over fi­nal­iza­tion of elec­tric­ity rates from coal-based power plants must be got rid of keep­ing in view the fu­ture re­quire­ments. The hag­gling over a penny here or there must be curbed. The decision-mak­ers must un­der­stand that the way oil prices are on the rise th­ese days, a time would come when Pak­istan may not be able to im­port even a frac­tion of its oil needs and the sys­tem of se­vere ra­tioning may be­come the or­der of the day. Pak­istan is at present im­port­ing around 4 mil­lion tons of coal from In­done­sia, China, South Africa, and Aus­tralia. Most of the coal is con­sumed by the ce­ment mills while the brick kiln mak­ers are also procur­ing this im­ported coal. Due to the es­ca­la­tion in the im­ported coal prices, the end-users mix do­mes­tic coal from Lakhra in Sindh or coal from the Balochis­tan area to re­duce the cost. There is one coal wash­ing plant in­stalled in Karachi but it is not able to pro­cure even 20% of its daily re­quire­ments.

Ac­cord­ing to ex­perts, many fac­tors are im­pact­ing on the in­ter­na­tional coal prices. Th­ese are: De­mand Strong growth in de­mand in Asia In­crease in de­mand in North and South Amer­ica Steady de­mand in Europe Sup­ply En­hanced ex­ports from In­done­sia Mas­sive de­cline in ex­ports from China Com­pet­ing Fu­els Coal is cheap but dirty Fuel oil is ex­pen­sive but dirty LNG is clean but ex­pen­sive Pol­i­tics Euro­pean Union is tax­ing car­bon emis­sion The US has im­posed costs on sul­phur and ni­tro­gen ox­ides emis­sion Fewer en­vi­ron­men­tal reg­u­la­tions in Asian mar­kets Freight Freight can cost more than coal and has a dra­matic im­pact on cost of coal China has im­posed a quota on coal ex­ports. Last year the coal quota

was 70 mil­lion tons but this year it was brought down to about 38 mil­lion tons. There has been mas­sive growth in coal­based pow­ered gen­er­a­tion in China and it seems that there would also soon be coal-to-liq­uid projects as well as uti­liza­tion of coal for in­dus­trial prod­ucts in the fu­ture. At present, the daily coal con­sump­tion in China is over 2 mil­lion tons. In­done­sian coal is com­par­a­tively cheaper but the de­mand for its coal is in­creas­ing.

The other al­ter­na­tive sources are South Africa, Rus­sia, and Aus­tralia, but th­ese are ex­pen­sive. Of course, a ma­jor con­cern is that un­re­strained burn­ing of coal is caus­ing en­vi­ron­men­tal prob­lems and re­cently WHO has cau­tioned about the use of coal as an en­ergy source. The out­look for the global power sec­tor is worth con­sid­er­ing. The In­ter­na­tional En­ergy Agency projects that en­ergy use in power gen­er­a­tion will ex­ceed the over­all growth in en­ergy sup­ply, ris­ing from 32% of to­tal use in 1990 to 41% in 2030. Coal is pro­jected to ac­count for 47% of world power gen­er­a­tion in 2030. Asia ac­counted for 20% of world elec­tric­ity de­mand in 1990 which is pro­jected at 44% in 2030. The share of coal has risen in the last few years from 56% to 63% as all over Asia, the power plants are switch­ing to coal. A re­cent anal­y­sis has fo­cused on the South Asian sce­nario. It in­di­cated that in Asia alone 200 GW of new coal-fired ca­pac­ity is planned by 2025. Growth in coal-based power plants is tremen­dous in Thai­land, Viet­nam, Malaysia, and even in coun­tries like Laos and Cam­bo­dia. In­done­sia plans to com­mit more coal to the lo­cal mar­ket, es­pe­cially to cap­tive power pro­duc­ers. There is talk of cap­ping the ex­ports to 150 mil­lion tons per year even though ex­pected pro­duc­tion is es­ti­mated to be 380 mil­lion tons an­nu­ally by the year 2025. There is also a grow­ing short­age of freight space and if the po­ten­tial de­mand is taken into con­sid­er­a­tion this could be an equiv­a­lent of 533 days wait­ing pe­riod. What if China com­pletely stops ex­port of coal and in­stead re­sorts to im­port­ing say, one mil­lion tons per day from In­done­sia and Aus­tralia.

That is al­ways a pos­si­bil­ity if the re­cent frozen rain dis­as­ter in China is taken as a case in point. This se­ri­ously af­fected the coal mar­ket. Pak­istan is

fac­ing an im­me­di­ate short­fall of nearly 4000 MW of elec­tric­ity daily even though the pol­icy plan­ners are talk­ing about 3000-3500 MW. It is to be noted that they prob­a­bly do not take into ac­count those who have been de­prived of power con­nec­tions or those who need power en­hance­ment to in­crease their pro­duc­tion ca­pac­i­ties. More­over, the ex­ces­sive use of gen­er­a­tors and UPS are also im­pact­ing on the al­ready tight oil sce­nario. PEPCO is talk­ing about bring­ing new power plants of 2200 MW by end De­cem­ber 2008. This is another lol­lipop be­ing given by the bu­reau­cracy sit­ting in PEPCO to the new Wa­ter and Power Min­is­ter. Then of course the KESC ab­sen­tee land­lords have done noth­ing to al­le­vi­ate the suf­fer­ings of the cit­i­zens of Karachi. The 220 MW (55x4 units) im­ported last year are still not en­er­gized de­spite what the CEO of KESC main­tains. The hang­over of the in­tox­i­ca­tion caused by the asi­nine decision of the new own­ers of KESC by giv­ing op­er­a­tions and man­age­ment con­trol to a multi­na­tional cor­po­ra­tion is still sting­ing. The am­a­teurs from the multi­na­tional messed up KESC un­til they were sys­tem­at­i­cally thrown out.

Of course, this multi­na­tional used un­due in­flu­ence upon the Karachibased po­lit­i­cal lead­er­ship and pro­vided false state­ments and as­sur­ances to get support from some of the lead­er­ship of the or­ga­ni­za­tion but ul­ti­mately the re­sult af­fected the lives of the Karachi cit­i­zens. Hubco with its 1200 MW is near Karachi but is sup­ply­ing to WAPDA un­der a com­plex agree­ment. There is news that this company is not get­ting paid and thus is de­fault­ing on pay­ments to PSO. What if the Hubco Board threat­ens to close down un­til bil­lions are paid pronto? Pak­istan would be in dark ages if that hap­pens. On the other hand, KESC is not pay­ing to PEPCO and there is this men­ace of clo­sure hov­er­ing over Karachi again. At the same time, mil­i­tants are blow­ing up gas pipe­lines putting a large part of Pun­jab into dark­ness. It is al­ways a pos­si­bil­ity that as time goes, Pak­ista­nis will spend most of their time in dark­ness with no food, fuel, or fi­nances.

The vi­able so­lu­tion is to de­velop the coal min­ing plants and at­tract mine own­ers, power pro­duc­ers and in­vestors to Thar. All en­er­gies must be fo­cused on this project. In fact it is high time a sep­a­rate Fed­eral min­istry is set up to deal with coal. The Sindh Coal Au­thor­ity has been an un­mit­i­gated dis­as­ter. The bu­reau­cracy there has no vi­sion and there is noth­ing but hot air blow­ing out from its of­fices. The Sindh provin­cial gov­ern­ment is called upon to un­der­take the process of de­vel­op­ing the mines im­me­di­ately. All dor­mant agree­ments have been can­celled and this is good news in the sense that now se­ri­ous in­vestors and pro­duc­ers would knock on the por­tals of the Sindh gov­ern­ment. It is hoped that bet­ter sense would pre­vail and the provin­cial gov­ern­ment would cre­ate po­lit­i­cal will to achieve the ob­jec­tives. Time is short and the progress of the coun­try is de­pen­dant upon fast and prag­matic decision-mak­ing. One does not have to go to Murree, Dubai, or London to take de­ci­sions that would af­fect the 160 mil­lion Pak­ista­nis. The de­ci­sions must be made now in Karachi. Hol­low slo­gans, hol­low prom­ises, and hol­low ob­jec­tives do not make a great na­tion. Vi­sion and strength cre­ate the crit­i­cal mass re­quired to at­tain the goals. Does this gov­ern­ment have that crit­i­cal mass? Only time will tell. (The writer is an Ex-Pres­i­dent Karachi Cham­ber of Com­merce and In­dus­try.)

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