Chinese Coal Power Plants in Pakistan Use Lower-Quality Coal, Charge Higher Rates
Pakistan’s Power Regulatory Body Exposes This Use of Inferior Coal Under CPEC framework, Raising Concerns Over Capacity Payments.
Chinese coal-fired power generators operating in Pakistan under the China-Pakistan Economic Corridor (CPEC) framework have been violating their signed agreements with Islamabad. They are using lower-quality imported coal, despite their pledge to import coal with a calorific value of 6000 (CVs).
Pakistan’s power regulatory authority exposed this blunder in a public hearing recently. The documents that these coal-fired power generators under CPEC submitted to the National Electric Power Regulatory Authority (NEPRA).
The power regulator noted that for years since they established their coal-fired power plants in Punjab, Sindh, and Balochistan provinces, continued to import coal of low heat value, but enjoyed differential on it. They claimed multi-billion rupees of capacity payments.
Currently, their plants’ total de-rated capacity is 6.77 GWh on imported coal. They have capacity payment claims against Pakistan of Rs643 billion (or USD2.12bn).
Against the specified quality in the agreement, they had been importing coal with CVs ranging from 4500 to 5500 and billing the customers for higher quality coal. The price should be for off-spec coal, but they were charging the rate for 6000 CVs.
The Pak-Afghan Border Issues Causes Delay and Cost
After the Taliban came into power in Afghanistan, besides imports from Indonesia and South Africa, these Chinese plants have also started importing coal from neighboring Afghanistan. However, the border issues that emerge from time to time between both nations adversely affect their activities.
Nauman Ali, an executive of Sahiwal coal-fired power plant said, “The never-ending border issues between Pakistan and Afghanistan have a detrimental impact on our businesses. Sometimes, the border is closed for an indefinite period, it creates uncertainty and it delays our coal consignments.” Normally, it takes a week for coal to reach our plants from Afghanistan.
Chinese Banks Offer Open LCs in RMB
The coal importers and power plants face difficulties due to exchange rate fluctuation and the curb of the Pakistani government on opening Letter of Credits (LCs) in US dollars, these coal-based independent power producers (IPPs) complained to NEPRA.
However, Chinese banks have come forward to rescue them. They have offered them that they are ready to open their LCs in Yuan [RMB] for coal import.
