Pakistan to Push Chinese Power Plants to Use Local Coal, Cut Energy Costs

Pakistan is urging Chinese independent power producers (IPPs) that currently rely on imported coal to switch to locally sourced coal to reduce generation costs and provide relief to consumers burdened by high utility bills.

“Pakistan this month will ask Chinese power plants operating in the country to shift to using coal from the Thar region rather than imported coal,” Federal Minister for Energy (Power Division) Awais Leghari told Reuters on Sunday.

Leghari noted that this transition could save Pakistan over Rs200 billion annually in imports, leading to a reduction of up to Rs2.5 per unit in electricity prices.

“Islamabad may also begin talks on re-profiling Pakistan’s energy sector debt during the visit to Beijing,” he added.

This shift would benefit the Chinese-owned plants in Pakistan by easing pressure on the country’s foreign exchange reserves, facilitating the repatriation of dividends, and offering a better return in dollar terms.

The power minister will be part of a delegation discussing structural reforms to the power sector, as suggested by the International Monetary Fund (IMF), which recently agreed on a $7 billion bailout for the heavily indebted South Asian nation.

Neighboring China has invested over $20 billion in energy projects in Pakistan.

“One of the key purposes of this trip is the conversion of our imported coal units to local coal. That would have a huge impact on the cost of energy and power in the near future. So, this is one of the main items on the agenda,” Leghari said in an interview.

In April, a subsidiary of conglomerate Engro agreed to sell all of its thermal assets, including Pakistan’s leading coal producer, Sindh Engro Coal Mining, to Liberty Power. Liberty cited Pakistan’s foreign exchange crunch and its indigenous coal reserve potential as reasons for the decision.

Leghari declined to elaborate on the possible talks with China regarding re-profiling energy debt.