The fuel cost of power generation in the country has surged by a notable 24.6 percent in April. The spike can be attributed to an increase in power generation through furnace oil, a relatively expensive source.
The cost rose to an average of Rs. 10.24/KWh on a month-on-month basis, marking a considerable jump from the average cost of Rs. 8.22/KWh in March this year.
The surge in fuel costs can be traced back to various factors, including a 6 percent decrease in hydel-based power generation, a 4 percent decrease in nuclear-based power generation, and a concerning 9 percent increase in the cost of generation based on Furnace Oil.
Adding to the concern, Pakistan experienced the highest decline in power generation (23 percent) since 2012. In April this year, the country produced 13,903 MWs, a significant drop from the 18,001 MWs generated in April last year.
“Despite historically lower power generation, the fuel cost has risen, indicating the need to focus more on local indigenous resources,” said Syed Saifullah Kazmi, Head of Investment Banking at Intermarket Securities Limited.
“Despite having ample coal reserves in Thar, the utilization of coal for power generation was a mere 16 percent (year on year), which is a cause for concern”, he said
“It is worth mentioning that while coal’s contribution to power generation in April this year was 18.2 percent, nearly equal to the contribution from hydel (18.7 percent), the overall low utilization rate of coal remains a significant issue,” he added.
With a staggering 175 billion tonnes of coal deposits in Thar, the reserves could make Pakistan self-sufficient for approximately 200 years by generating around 100,000 MWs, which gives the country a golden opportunity to achieve self-sufficiency and stability in the energy sector.
“In fact, the expansion of Thar Coal Block II mine to 12.2 million tons per annum (Phase III), holds the potential to provide cost-effective energy solutions and reduce reliance on expensive imported coal,” he stated.
Expected to be completed by June 2023, the phase III expansion by SECMC promises economic stability and energy security for the country. The mining company operating currently boasts an annual production capacity of 7.6 million tonnes, empowering a cumulative power generation of 1,320 MWs from Block II.
“The potential impact is substantial, with an estimated annual savings of approximately USD 1.2 billion in foreign exchange reserves. This amount could do wonders for Pakistan’s energy market, paving the way for long-term stabilization and growth,” he reasoned.
The development of Thar Coal projects offers a viable solution to address Pakistan’s increasing trade deficit and reduce dependence on imported fuels. By harnessing the abundant coal reserves in Thar, the country can curb economic challenges and achieve greater energy security.
