KARACHI, July 14: The federal government has set up a new Thar coal mining company to make use of vast reserves for power generation. The federal government will bear 80 per cent of the cost while the rest will be covered by the Sindh government.

Director-General of Sindh Coal Authority Syed Abbas Ali Shah told Dawn that the company would undertake mining projects for power generation.

The step has been taken in view of lukewarm response of foreign companies in mining.

The first meeting of the autonomous company, which is presently headed by additional secretary petroleum, was due to be held in Islamabad at the weekend to discuss ways and means to launch schemes for exploitation of Thar coal deposits lying dormant since 2002.

It will also discuss the issue of initial seed money and a working model for the new entity.

The federal government has decided to undertake the mining and power generation projects by itself to meet the future energy needs of the country after two foreign companies, a US and a Chinese, withdrew from coal mining in Thar. They withdrew reportedly because of problems related to shortage of surface water in the area and tariff dispute with Wapda.

He said of the 175 billion tons of total coal deposits in Thar, 12 to 14 billion tons are proven reserves. These have been divided into six mining blocks and mining lease for two blocks with a view to set up coal-fired plants has been granted to two local firms, Hassan Associates and Associated Group.

The Sindh Coal Authority has decided to carry out a hydrological study to explore underground or surface water resources required in abundance for coal mining.

The study for estimation of coal deposits found in 1994 was completed in 2002 and since then no significant progress had been made for mining of coal to be used for power generation.

Meanwhile, the Asian Development Bank has agreed to provide financing for the development of Thar coal deposits for producing electricity and has asked the Sindh ministry of minerals to submit schemes eligible for bank’s financing.

The decision was announced at the ADB meeting this week at the Sindh Planning and Development department held to review utilisation of ADB’s funding for implementation of various development schemes in the province.

The bank is already providing financial assistance for various projects in roads, agriculture, health, education and irrigation sectors etc. But it is for the first time that financing has been offered for development of Thar coal deposits.

Tufail Jumani, the secretary of minerals, told Dawn that the ADB had realised the importance of coal mining projects and offered the ministry to prepare coal deposits development schemes with its assistance.

The ministry has reserved the entire coal deposits in Thar for power generation and miners are restricted to sell the commodity in the local market.

The ADB has initially indicated a sum of $5 million for carrying out studies in the Thar coal area. However, the amount will be increased when the ministry submits detailed schemes for the development and mining of coal deposits.

The ministry has, so far, signed eight MoUs with the private sector companies, including a Chinese firm for mining coal for setting up power plants in the province.

Jumani, however, said the success of these projects would depend on the tariff offered by Wapda to these companies for the purchase of power.

He complained that a foreign firm interested to set up a power plant in Thar area packed off as Wapda refused to purchase power on a reasonable rate.

The province has total coal deposits of 184 billion tons, including 175.5 billion tons in Thar, 7.1 billion tons in Thatta and 1.3 billion tons at Lakhra.