LAHORE: With global energy markets and supply chains reeling from heightened volatility amid the US-Iran conflict, experts have urged the government to accelerate efforts to reduce reliance on imported fuels by tapping the full potential of indigenous Thar coal.

Currently, over 40 per cent of Pakistan’s primary energy supply is met through imported crude oil, refined petroleum products, LNG, and coal. This heavy dependence leaves the country dangerously exposed to global price shocks, with serious implications for inflation and the current account deficit.

Experts estimate that for every $10 surge in oil prices, the current account deficit widens by roughly $1.5 to 2bn, while inflation typically rises by about 0.5 to 0.6 percentage points. These macroeconomic risks can be mitigated through greater reliance on local coal-based power generation and increased injection of indigenous gas into the system.

In recent weeks, imported coal prices have experienced a significant increase to around $110 per tonne (FOB), approximately 22pc higher than 2025 levels. The power and cement sectors, both heavily reliant on imported coal, will be affected most by this development.

“As seen from the Russia-Ukraine war and the ongoing Middle East crisis, greater utilisation of Thar coal across energy and other industrial sectors remains key to reducing economic vulnerabilities, lowering production costs and enhancing Pakistan’s global competitiveness,” said A A H Soomro, an independent economic and investment analyst.

Currently, Thar Block-I and Block-II have a combined production capacity of around 15 million tonnes per annum, supplying 2,640 MW of affordable electricity to the national grid. By the second half of 2026, Thar Block II is expected to expand its mining capacity to 11.2m tonnes per annum to ensure supplies for the 660 MW Lucky Power Plant.

Meanwhile, the government is making efforts to begin blending Thar coal at three other imported coal-based IPPs (3,960 MW), namely the Sahiwal Coal Power Project, Port Qasim Coal Power Project and Hub Coal Project.

“Historically, imported coal-based power has carried around a Rs 4/kWh premium over Thar coal, but this delta will widen as global coal prices rise,” Soomro said.

By switching power generation, cement, and other industries from imported coal to local Thar resources, the government expects to save approximately $2 billion annually on the national import bill.

Investors will show greater confidence in allocating capital if consistent demand for Thar coal is ensured via long-term fuel supply contracts, guaranteed purchase by industries and a fair tariff structure.

He proposed that the government could also introduce mandatory blending targets for imported coal plants as a similar policy for domestic coal utilisation has been successful in India.

Coal demand in Pakistan is expected to reach 50m tonnes by 2030, necessitating a robust local supply chain. “Beyond the power sector, the cement sector alone has a demand of around 5m tons, with plans to blend up to 20pc Thar coal,” he said.

Published in Dawn, March 11th, 2026