In the year 1994, the government displayed a visionary solution to national energy needs. It took a political decision and announced an upfront tariff of 6.5 cents, which was then higher than the tariff offered by any other country and provoked severe criticism. However, it produced 3,000 MW of electricity and $4 billion investment in a record time.

It is due to this vision and political will that Pakistan is not immersed in darkness today. It offered investors a more than decent profit and simultaneously saved the nation from bearing the heavy negative cost of not producing electricity (which is currently in excess of $1/kWh).

Considering the perceived political environment and the global image that the government has projected, it is imperative for the decision makers to adopt the same visionary standpoint on electricity generation based on Thar coal. The government has to offer an attractive profit to the investors, viz. an attractive upfront tariff. No investor would come to invest in Thar at a rate of return of 15 per cent. Let’s get real. We’re talking about a desert inhabited by one of the most backward societies. This is not Bali, Chennai or Dubai. If the NEPRA insists on 15 per cent, one cannot see no light at the end of the tunnel.

Today, even plant manufacturers and consultants, who do not bear any financial risks, are reluctant to come here to provide the plant and services against a fee, leave aside investment. This factor, coupled with the growing global shortage of turbines and power generation units, along with competitive opportunities being offered by India, poses a huge challenge to those who are willing to invest, despite the risks, to develop this project. Hence, the name of the game is an attractive upfront tariff.

Presently, the cost of imported fuel consumed by thermal power plants alone is around 13cents. This tariff may hit new peaks depending on the volatile fluctuation of oil prices. Any increase in the fuel price shall be passed through and will be unbearable for the consumer. Today, the country is paying an exorbitant amount towards the colossal import bill to meet the fuel demand of thermal power stations.

In the case of Thar, there is no question of the fuel being passed through since the power plants will be based on indigenous fuel. The tariff for Thar power will be levelised for a period of 30 years whereas the unchained tariff for thermal power will be in excess of 25 cents in the near future. Where will the country stand then in terms of basic energy sustainability and affordability?

If one takes the regular route as per the Power Policy of 2002, developers will lose two years in the process. The 2002 policy has not produced the desired results expected of it because it lacks the vision and foresight required to promote and develop power projects on a large- scale based on coal.

The government should take a political decision and announce an upfront tariff, not exclusively for one group but for all those interested in the development of Thar lignite, as it has done for wind projects. If an upfront tariff is announced by the government, it shall reduce the time period of achieving financial close by at least two years.

The Nepra’s arguments against an upfront tariff are: 1) it does not have the necessary experience and expertise to examine the feasibility studies done by various consultants and 2) in cases where the upfront tariffs were announced for different fuel sources, they were unacceptable to the IPPs.

These arguments can be countered with the following response: 1) considering the importance of the largest energy source in the country, i.e. indigenous coal, the Nepra should have been prepared to analyse the existing studies; the upfront tariff did not attract investors in the case of wind because the tariff offered was short of being realistic; 2) in the absence of expertise, common sense and logic should dictate their decision making, especially considering the dire need of the fuel source in question.

In any case, the upfront tariff should be subject to periodic reviews after taking into account the various potential factors that may affect the tariff economics.

Once the Thar treasure is exploited, the immediate benefits will include employment, savings on foreign exchange, minimum of six million dollars of revenue per year for the Sindh government initially, etc. The long- term benefits will amount in hundreds of billions of dollars: first by nullifying the negative cost of not producing enough electricity to meet the country’s demands (which currently is in excess of $1/kWh) and secondly by enforcing the multiplier effect to enable the installation of countless new industries. These are benefits that only the development of indigenous fuel sources can provide.

It is most unfortunate that Pakistan is starved for energy and given the fact that the cost of imported fuel is reaching new peaks on an almost daily basis, the people who are assigned to help the decision makers are totally indifferent to the country’s requirements.

The only way to exploit our abundant indigenous coal resources is to announce an attractive upfront tariff for all parties interested in its development. Meeting our energy requirements from Thar no longer remains an urgency but has become an emergency.

The writer is executive director of Hasan Associates.