Govt to pursue Gwadar coal project

KARACHI: The federal government will contact the National Development and Reform Commission (NDRC) of China regarding the 300MW imported coal power project in Gwadar, which has yet to make any progress.

Recent media reports suggest that the government may scrap the project, as the Chinese company, CIHC Pak Power Company (Pvt) Ltd (CPPCL), is unwilling to proceed without a further upward revision in tariff.

Managing Director of the Private Power & Infrastructure Board (PPIB) Shahjahan Mirza had set a deadline of September 18, 2024, for the company to provide its final response. The company was advised to consult with Chinese authorities and project sponsors for an updated status on further development.

Officials disclosed that no response has been received from the company so far, and it has now been decided at the ministry level to approach the NDRC to seek a breakthrough.Gwadar is the gateway to the China-Pakistan Economic Corridor (CPEC), and a coal-fired power plant was planned there to meet the future electricity needs of the port city. Given the importance of the project, the minister for planning had directed the relevant authorities to expedite its progress. However, no significant breakthroughs have been made.

The groundbreaking ceremony for the project took place in 2019, with expectations that construction would start soon. However, the project continues to face hurdles, as no development work has been carried out to date.

The government is currently pursuing a policy to convert imported coal projects to local coal from Thar to conserve foreign exchange reserves. However, the planned power plant in Gwadar falls outside this policy due to its distance from the country’s main coal fields, which are primarily located in Thar.

As the government strives to utilize coal for power generation, it has faced criticism from the environmental organizations concerned about the degradation caused by coal burning. A recent study by the Pakistan Research Institute for Equitable Development (PRIED) noted that current methods for determining energy tariffs for coal and other fuels typically include costs related to energy production, infrastructure investment, financing, transmission, distribution, consumer connections, fuel price adjustments, operation and maintenance, government subsidies and taxes.

However, these calculations overlook several costs not directly incurred by investors, distributors or consumers, but which impact society and the environment. For instance, public health issues faced by communities near power plants and coal mines, greenhouse gas emissions, toxic pollution and water resource degradation are externalized costs not accounted for in traditional pricing models.The report highlights that certain well-established external costs, such as the social cost of carbon -- which is updated annually -- are not reflected in periodic cost adjustments.