INORDINATE delays and slow progress on infrastructure projects is likely to adversely impact the Sindh Engro Coal mining project, which was kicked off by Prime Minister Nawaz Sharif on January 31.

Originally, coal extraction was to commence by June 2012, whereas the mining project is now to be completed in 2017. Its parameters have also been revised a number of times. In the first phase, the mine was to produce 6.5m tonnes of lignite (sufficient for the 1,200MW power plant planned by company), but it was later reduced to 3.8m tonnes after the power plant’s capacity was revised down to 660MW.

Now, the Sindh Engro Coal Mining Company — a joint venture between the Sindh government and Engro Corporation — will instal the first of two 300MW units of equal capacity in the first phase. Furthermore, the project has not reached financial close yet. A consortium of Chinese and local banks are expected to finance this project, but it requires a sovereign guarantee of $700m, which has only recently been arranged.

The Sindh budget FY15 has allocated over Rs20bn for the energy sector, focusing on development of Thar coal and power generation projects. a sum of Rs13.5bn will be spent during the year on ongoing and planned infrastructure schemes in Tharparkar, which is a pre-requisite for implementing the coal projects. This includes packages of Rs500m for the Thar Development Plan and Rs400m for uplift of Tharparkar district.

None of the important infrastructure projects for Thar coal mining has achieved significant physical progress, despite over Rs50bn spent over the last five years

Meanwhile, the federal budget FY15 incorporates in its development outlay Rs205bn for the underground coal gasification project in Thar and for transmission lines for dispersal of power from the proposed Thar power plants. While one expects that these allocations would help speed up various long-awaited coal mining and power generation projects, past performance belies the hopes, notwithstanding the government’s current policy of pursuing multiple power projects based on imported coal.

The Sindh Engro Coal Mining Company is supposed to mine 22.5m tonnes of coal annually from a block of Thar coalfield, and its subsidiary Thar Power Company would subsequently develop 4,000MW mine-mouth power plants, in two phases. The Sindh government had given a 30-year mining lease to Engro Powergen in October 2009 for Thar Block-II, spread over 95.5 sq km, and having about 2bn tonnes of reserves (proven 0.414bn tonnes, exploitable 1.57bn tonnes).

According to the joint venture agreement, the Sindh government is responsible for providing necessary infrastructure support, including strengthening the existing 360-km road network from Karachi to Islamakot — the nearest town to serve the coalfield — as well as connecting national railways to the mine site, constructing an airport in Islamkot, master planning of Islamkot, and arranging fresh water supply and mining-effluent disposal for Block-II. The estimated cost of these schemes on completion is Rs148bn. However, none of the important projects has achieved significant physical progress as yet, in spite of the over Rs50bn that the provincial government has already spent in the last five years.

Huge funds of Rs 10bn and Rs12bn were allocated for construction of these schemes during 2012-13 and 2013-14 respectively. Yet, the contract for mining-effluent disposal, which was scheduled for completion by June 2014, has not been awarded yet, whereas widening of roads is in progress only in the Tharparkar area.

Likewise, the construction of the airport, for which bids were received in September 2010, is still underway, when it was to be completed in two years. Work on laying down railway connections has not been started by Pakistan Railways. And the National Transmission and Distribution Company has yet to undertake any physical work on constructing the 230-km long 500-kv transmission line.

The removal of massive quantities of overburden (surface material, consisting of stable sand dunes, alluvium and sedimentary rocks), with total thickness/depth of 144-233 metres above the first coal-bed, are currently in progress on the initial mining area of 20 sq km. The phased-out construction of an open cast lignite mine will follow.

Except for some progress (made by the Sindh Engro Coal Mining Company), none of the projects has achieved the defined milestones and has fallen much behind timeline. Sino Sindh Resources were to extract coal by 2015, while the Cougar project was to start physical implementation in 2013-14. Oracle was to construct mines in 2013, enabling coal extraction by 2014, but now the removal of overburden is scheduled in 2015. The pilot power project of 8-10MW using coal gasification technology has not yet been commissioned, resulting in a long delay for a 100MW project that was approved in April 2009.

Published in Dawn, Economic & Business, July 14th, 2014