Non Opening Of LCs Can Increase Fuel Import Bill By $40M

The mine operations of SECMC have been severely impacted as a result of the non-opening of letters of credit (LCs) for the import of mining equipment.

Non Opening Of LCs Can Increase Fuel Import Bill By $40M

The current issues regarding the import of critical mining spare parts are expected to increase Pakistan’s net fuel-based import bill by approximately $40 million for three independent power producers (IPPs).

The mine operations of Sindh Engro Coal Mining Company (SECMC) have been severely impacted as a result of the non-opening of letters of credit (LCs) for the import of mining equipment.

“If this situation continues for even a month and the mine does not operate, the country will be forced to import fuel worth $40 million for three IPPs that run on Thar coal,” a source said.

According to the source, SECMC provides 7.6 million metric tonnes of local coal per year to three Thar-based IPPs, and any delay in importing equipment has a direct impact on the Phase III project. The total of 2,640 MW is generated from Thar coal blocks I and  II, and its contribution is almost 30 percent of the country’s power.

The current contribution of 2,640 MW from power plants using local coal is well in line with the Indicative Generation Capacity Expansion Plan (IGCEP), which calls for 34,377 MW of capacity to be added by 2030.

The 10-year plan (starting in 2021/30) will help increase indigenous power’s contribution to energy generation from 58.9 percent to 90.2% by 2030, resulting in greater energy security in the country.

The fact that the fuel cost of imported coal is much higher than the power generation cost of Thar coal demonstrates the significance of using local coal for power generation.

According to the National Electric Power Regulatory Authority’s (Nepra) State of Industry Report 2022, the fuel cost per unit of energy generated from imported coal increased from Rs20.17/kWh to Rs29.12/kWh, while the per-unit cost of energy generated from the local Thar coal remained around Rs4 to 4.5/kWh.

Pakistan imports coal primarily from South Africa and Indonesia, and the price of this imported coal has skyrocketed. Only in the last year has the delivered price of South African coal increased from $177 per tonne to $407 per tonne.

Pakistan currently spends approximately $21.43 billion per year on fuel imports, which accounts for approximately 66% of its total foreign exchange reserves.

Pakistan imports nearly one-third of its energy resources in the form of oil, coal, and regasified liquefied natural gas (RLNG), with imported fuel accounting for 47 percent of installed capacity.

It is critical to reduce reliance on imported fuels and increase reliance on indigenous energy supplies in order to supply cheap electricity to consumers and industries, which will help ensure the much-needed energy security that the country deserves.

The fuel import bill refers to the cost of importing fuel, such as gasoline and diesel, into a country. This cost can include the cost of the fuel itself, as well as any tariffs or taxes imposed on the import of fuel. The fuel import bill can have a significant impact on a country’s economy, as fuel is a major cost for many industries and for consumers.