Coal – Pakistan’s Energy Saviour
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.)