The import of Afghan coal is facing payment bottlenecks with receipts of letters of credit (LCs) for July and August still pending, including approvals of $85 million for coal power plants.
The Central Power Purchasing Agency-Guaranteed (CPPA-G) chief executive officer, Rehan Akhtar, said during a public hearing that the State Bank of Pakistan (SBP) is hesitant to approve forex payments for imported coal due to reserve constraints, reported a national daily.
The top CPPA executive explained the country was warehousing/conserving imported coal with winter just weeks away. He stated, “[The] Power Division reached this decision to conserve South African coal because SBP is not approving payments, with approval of LCs of July and August 2022 still pending. The day LCs of this high volume are retired, a sudden fluctuation in the exchange rate is witnessed in the market. This is the reason imported coal, especially, South African coal was reserved for the winter months”.
In response to discussions on coal supply not being up to the mark, he mentioned that approvals of $85 million of coal power plants are pending with SBP. Other than that, he said there are some barriers to the import of coal in Pakistani rupees from Afghanistan due to border fighting that claimed two to three lives. However, the coal supply from Afghanistan is now normal.
The meeting was also informed that both the Hub China Power Plant and the Sahiwal Coal Power Plant are not operating, while the government has reserved imported coal for use during the winter months. He said that because of conservation, the coal stock position improved in October, and the supply position will improve in the winter.
Pakistan’s decision to allow the use of Afghan coal in local power generation has increased the import of coal from the neighboring country. The decision was taken to cut the generation cost from the coal-based power plants as the coal imported from other parts of the world was more expensive vis-Ã -vis Afghan coal. The decision was aimed at reducing the forex impact on the country as the payment was made in PKR.
So far, the import of coal from Afghanistan to Pakistan has increased by 484 percent during the first quarter of 2022-23 following a hike in international coal prices and the government’s decision to allow the use of Afghan coal in power generation. The total coal import during the first quarter (July to September) of the fiscal year 2022-23 reached $107 million from $18.30 million during the same period last year.
