‘Lobbying’ against coal-based power projects

Posted on June 14, 2011. Filed under: Fossil fuels |

TWO ministers of Sindh have accused the ‘petroleum lobby’ and ‘supporters of large dams’ of manoeuvring to prevent productive use of enormous coal reserves of Thar region and creating hurdles in building of coal-based power stations. This is the first such explanation by any government functionary why the Thar coal deposits discovered in 1992 remain unutilised till today.

The two ministers are Syed Murad Ali Shah and Ayaz Soomro. They were on a visit to Karachi Chamber of Commerce and Industry on May 17 to discuss matters relating to the provincial budget. Shah, the provincial finance minister, said that a powerful lobby in oil import business, which has a strong influence on government’s decision-making, ensured that only the expensive oil was used for electricity generation, and discouraged efforts for use of coal. And the supporters of big dams, who always argued that dams were imperative for Sindh’s water and power requirements, he said, saw to it that the province and the nation remained deprived of electricity generation from coal.

Ayaz Soomro, the law minister, said that Sindh had been forced not to pursue coal development. “Bureaucracy in the federal government has a major role in nondevelopment of coal resources,” he added.

The ministers’ narrative absolves the political elite of Sindh of any role in delaying the utilisation of precious coal deposits. Although the clout of the so-called oil lobby can hardly be denied, the fact that it can succeed in freezing a project of great national importance for almost two decades, is not convincing enough.

In fact, the successive governments in Sindh are more to blame for the unforgivable delay for they have never been keen, nor shown any resolve, to implement this project on a fast pace. The 185 billion tonnes coal deposits, which are lying like a huge waste, could not be exploited primarily because of bureaucratic intrigues, cabinet ministers’ inefficiency and indifference and then the prolonged power tussle between the Sindh government and the federation over control of these deposits.

As a result, the body tasked with handling the project kept reshaping itself and changing its name with the changes in the government with no progress on the ground .

It seems incredible that no concern for nation’s urgent power needs was shown by either the central government functionaries or the Sindh ministers. The senior government officials were more interested in settling tariff rates and kickbacks with both foreign and domestic investors over purchase of electricity.

Dr A.Q. Khan, the reputed nuclear scientist, recently wrote in a column that with the help of Riaz Mohammad Khan, the former ambassador to China and later foreign secretary, he had arranged a deal in 2002 with one of the largest coalmining and processing companies of the world, Shenhua Group of China. The company was willing to provide electricity at 5.39 cents per unit and had committed to set up four power plants of 325 MW each, by 2010. But since no commission was involved, the deal was cancelled. Shenhua employs about 170,000 people and produces thousands of megawatts of power. It has put up plants in Mongolia, Indonesia and Australia.

Such has been the prevalent at titude for more than a decade although Sindh government has been spending a huge amount on building infrastructural facilities as well. The political figures handling the project acted more like rent-seekers and less like responsible administrators, treating coal deposits as a source of personal profits rather than of national pride.

In 2009, confrontation between Islamabad and Karachi over Thar became so intense that it resulted in non-allocation of funds for the development of mines in the Thar project in the PSDP 2009-10. The Annual Plan Coordination Committee decided to put on hold the allocation until the 16-year old dispute was resolved.

The two Sindh ministers while blaming the oil lobby have not talked of resisting the anti-coal ‘conspiracy’ by expediting the work on power projects in Thar. While the coal-fired power stations are no more welcome in the world for reasons of global warming (Pakistan is turning to gasification), they are still providing nearly half of total electricity compared to other sources.

No developed country has yet abandoned the use of coal for power although new plants are either in decline or not coming up. The United States has at present more than 600 coal-based power plants but no new plant has been added since 2008. Republicans’ loyalty to coal is evident from the fact that on February 18 this year, the House of Representatives, controlled by them, voted to block the Environmental Protection Agency from regulating greenhouse gases. On May 25, deputy assistant secretary of department of energy said that new EPA regulations mean a lot of coal-fired power plants will shut down soon.

The largest producers of coal, based on 2008 estimates are: China 2761 million tonnes; USA 1007 million tonnes; India 490 million tonnes; Australia 325 million tonnes; Russia 247 million tonnes; Indonesia 246 million tonnes; South Africa 236 million tonnes; Kazakhstan 104 million tonnes; Poland 84 million tones; Colombia 79 million tones and Pakistan mere 150MW.

To attract investment in Pakistan, the Federal Board of Revenue has allowed a 30-year tax holiday for companies intending to produce power from Thar coal fields. In a notification on April 24, it exempted 10 per cent income tax on the dividend of any project at Thar coal fields for 30 years from the launch. Similarly, the payments for goods, services, construction and other operations of the project would be exempted from up to 3.5 per cent withholding tax.

The concession has been given on the recommendations of the Privatisation Commission and Thar Coal Development Board, which want a tax-free environment for investors. Currently, the electricity produced from coal is less than one per cent of the overall national energy mix in the country. It is mainly used for firing brick kilns.

It is interesting to note that everywhere as here in Pakistan natural gas is preferred to coal for electricity generation although Pakistan’s gas reserves would last for only 20 years and coal reserves would take about 200 years to consume.



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