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Coal mining in Balochistan

July 28, 2008

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In his budget speech last month, Balochistan’s Finance Minister Mir Asim Kurd said the provincial income from mining had increased from Rs100 million to Rs500 million over last financial year on the back of current production of more than two million tons.

The province possesses huge reserves of coal at Hamai, Degari, Mach, Ziarat, Chamalang and Abegum estimated at 217 million tons. The 60 km-long Chamalang coal mines contain coal ranging from high volatile C bituminous to high volatile A bituminous with a total reserve of six million tons.

“Nearly 200-250 trucks of coal leave daily for different parts of the country from Chamalang mines. Coal is being sold at a price of Rs4000-4500 per ton, but if the Pakistan Steel also starts purchasing coal for its boilers, the price may go up to Rs6000 per ton. , says Nadeem Khan, owner of a local coal trading company.

The Chamalang-Mekhtar track had been made operational for heavy traffic. Tribal rivalry in the area had obstructed the mining over the last three decades. The Luni and Marri tribes had been at war over the ownership of the mines. These mines were made operational following the tripartite agreement among the Marri and Luni tribes and mine contractors on December 12, 2006.

“There is no electricity and the mining company has made its own arrangements. There is no water facility and roads are in miserable condition”, laments Nadeem Khan.

“Investors still have concerns over security.. Presently, the deployment of armed forces in Chamalang area gives a feeling of security to mining companies and workers, yet there are reservations about sustainability of the current security situation ”, another local coal trader said. Officials claims a new township is emerging around Chamalang coal mining area, having most of the civic facilities. They claim that thousands of workers are arriving in the area since mining has resumed and peace restored. The number of job created in the area may go up from 10,000 to 50,000. According to a rough estimate, the profit from the supply of coal from Chamalang mines would be worth Rs30 billion per annum.

“Majority of workers belong to Swat and other areas of NWFP province. There is still a shortage of local workers ”, said a local coal trader.

Last year, chairman of Pakistan Steel during a visit to Balochistan announced to purchase 60,000 tons of coal at an estimated cost of Rs250 million. But this did not happen. Pakistan Steel depends on costly imports.

It is said that it is not feasible for Pakistan Steel to use Balochistan coal with larger sulphur content, as sulphur gets accumulated in different parts of a boiler. Raw coal contains different impurities like sulpher, calcite, clay, rock and shale. This impure coal cannot be utilised in the industry hence impurities must be washed out. For saving energy and cost, there is a need to set up coal washing plants in the province.

Presently, bricks makers utilise over 80 per cent of the local coal and the rest is consumed by cement makers who blend it with imported coal to reduce the cost of production. Coal is the cheapest source of thermal energy used in industrial sector. It has the potential to replace other expensive fuels such as furnace oil.

As price has significantly increased in the international market traders say that it would be cost-effective for Pakistan Steel to mix the cheap local coal with the imported one. The quality of Chamalang coal is better than the rest of coal being mined from different coalfields in Balochistan.

A strong lobby fiercely resists the use of indigenous iron or coal and other inputs as it would slash their commission. There is also an issue related to the profit of local mine owners, as the provincial government provides a subsidy to them. “Coal-mine owners Rs100 a ton as sales tax. If the local mine-owners supply coal to Pakistan Steel, they will have to pay15-18 per cent a ton as sales tax to the government. Hence, they deem it not cost-effective and prefer to sell it to the cement sector or brick makers”, a coal trader told this scribe.

About one per cent local coal is presently utilised by coal-based power stations. Balochistan government has signed a memorandum of understanding (MoU) with a Canadian firm for setting up 50 megawatts coal-fired power plant.

Under the deal, Balochistan Power Generation Limited (BPG) and Canadian Everlight Energy Corporation (EEC) would prepare feasibility of the project and submit it to Provincial Thermal Power Board for review. The board would settle matters relating to tariff and supply of electricity between Quetta Electric Supply Company (QESCO) .The companies would be bound to spend five per cent of their total revenue on development of social sector in the areas where they supply power.