HYDERABAD: Sindh Chief Minister Syed Murad Ali Shah has urged Federal Finance Minister Mohammad Aurangzeb to address financing constraints of Thar Coalfield and encourage promotion of indigenous sources of energy, especially Thar Coal, by mandating all scheduled banks to lend for projects focusing on indigenous energy.

Sindh Minister for Energy Syed Nasir Hussain Shah confirmed to Dawn on Friday the chief minister had conveyed this to the federal minister through a letter written a few days back.

He said that there were many investors who needed bank loans. “Many investors are showing keen interest in investing in the energy sector,” he said and added that that was why the chief minister had sent the letter to the federal minister.

The CM wrote the letter after the 27th meeting of the Thar Coal Energy Board (TCEB) and said that since 2019 Thar coalfields had been instrumental in generating electricity through an indigenous energy source. As per latest data released by National Transmission & Distribution Company, weighted average cost of generation through Thar coal was Rs4.3 per kilowatt-hour which was the lowest cost for base load electricity generation. Coalmines at Thar Block-I & II had been producing more than 15m tonnes of coal annually, he said.

“We have more than 5,000MW of coal-fired power plants which relied on imported coal. Our cement industry is reliant on imported coal. It is estimated that indigenization of imported coal can save Pakistan more than US$3bn in foreign exchange outflow through import substitution,” argued the CM in the letter.

The minister said quoting the CM that this strategy would not just save precious foreign exchange reserves but would also reduce cost of energy in the process. Moreover, the federal government was formulating “Sustainable Coal Utilization Policy 2024” for optimal utilisation of Thar coal for other uses like coal to fertiliser, coal to gas and coal to liquid etc, said the minister.

He said that it must be reiterated economic growth underpinned by industrial growth required availability of affordable energy and Thar coal could play an instrumental role in providing the same.

“A key constraint to growth in production of Thar coal is availability of financing from local banks,” he said, adding that due to a mix of liquidity constraints, circular debt and internally mandated climate goals, coalfields and power plants at Thar coalfields found it difficult to raise financing.

He proposed that federal finance ministry and State Bank of Pakistan should support industrialisation, development, conservation of foreign currency reserves and acquisition of energy security by “mandating all scheduled banks to lend to projects focusing on indigenous sources of energy especially Thar Coal; such a mandate can be through imposition of a lending quota, wherein the scheduled banks are mandated to increase their advances to indigenous energy projects to one per cent of deposits by June 2024 and up to three per cent of deposits by June 2027.”

He said that any shortfall from the mandate could be placed as an interest free deposit with SBP. The ministry and the SBP could create separate lending sector for local coal mining and power, such that the same was segregated from power sector which was already reeling under stress of circular debt, he said.

“Thar coal has demonstrated ability to bring down generation cost significantly and any incremental capacity will be at a much lower capital cost as production scales up. In order to ensure energy security and to spur industrial growth, affordable energy is a prerequisite, and Thar coal is ready to support the same,” said the CM in the letter.

He said that a working group could be constituted to chart out way forward for interventions suggested in the letter.

Published in Dawn, June 1st, 2024