KARACHI: Coal mined from Thar fields is going to be used by Power Cement Ltd as part of a trial run, Sindh Engro Coal Mining Company Ltd (SECMC) said on Wednesday.

Speaking to Dawn, SECMC CEO Amir Iqbal said his company previously let Bestway Cement Ltd use the locally mined fuel for cement manufacturing — an experiment that yielded a “positive result”.

The memorandum of understanding will allow Power Cement to burn Thar coal in its kilns to assess the potential of shifting from imported to locally sourced fuel and reduce costs.

JS Global Assistant Vice President Waqas Ghani told Dawn that coal imports, except those from Afghanistan, are currently on hold. The country is in the middle of a dollar shortage, which has brought the imports of the key raw material for cement makers to a halt.

“Cement producers are using mostly Afghan coal. In some cases, they’re sourcing it from either Dara Adamkhel or Dukki, Balochistan,” Mr Ghani said. Thar coal is cheaper than all other types of coal, but its heating value is not that high, he said.

According to Mr Iqbal of SECMC, there’s no excess output from the current mining operations that the company can spare for cement makers regularly.

However, expansion is already underway and the company will have “three to four million tonnes” of additional coal in the fourth phase of its mine development. SECMC is planning to sell that additional output in the fourth phase to cement makers, he said.

Being the only company that’s mining the Thar fields, SECMC extracted 3.8m tonnes of coal annually and sold its entire output to Engro Powergen Thar until recently. It doubled its mining capacity to 7.6m tonnes per year last year, which coincided with the commissioning of the 330-megawatt Thar Energy plant. Another power producer of 330MW, ThalNova Power Ltd, recently started producing electricity, ensuring 100 per cent consumption of the enhanced output of SECMC’s mine in Block 2 of the Thar coalfields.

With the mining block’s third-phase expansion by June 2023, SECMC’s output will increase to 12.2m tonnes a year. The increased mining will supply fuel to the 660MW power plant that Lucky Electric Power Company has just commissioned at Port Qasim.

International coal prices peaked in the recent commodities super-cycle. But Thar coal is available to local power plants at a significant discount because its price isn’t pegged to the global market.

Based on the pricing structure in place for Thar coal, SECMC earns an internal rate of return or IRR of 20pc above the project cost.

The price of indigenous coal is around $42 per tonne in the ongoing second phase versus the international rate of around $166. The rate of Thar coal will further drop to $27 per tonne when the third phase is completed.

But the SECMC CEO said the company would like to sell its output to cement makers in the fourth phase of development at the “market-based, competitive rate”.

“We’re a regulated industry. It’s too early to say what rate we’ll offer to cement makers. But we’d like the coal price for non-IPPs to be competitive,” he said while referring to independent power producers that have been so far the sole buyers of Thar coal.

The company’s statement said 5m tonnes of coal a year will be required for blending up to 20pc of Thar coal in the cement industry.

Published in Dawn, January 26th, 2023