KARACHI: In a surprising move, the China Machinery Engineering Corporation (CMEC) has hinted to stop working on Thar coal mines after September 10, citing the “overdue receivables” which has rebounded to $50 million.
In a letter to Sindh Engro Coal Mining Company (SECMC), the CMEC has stated that as of the end of July the “overdue receivable” rebounded to $50 million and how to clear this has become the most important problem for both SECMC and CMEC.
“At present, there are only 4 months left in the contract period of Thar Coal Mine Project, and there will be about $30 million in offshore and onshore milestone payments in the next few months,” stated the CMEC letter, available with Business Recorder.
The company clearly stated that after discussions with the site teams the CMEC decided to overcome the huge difficulty of equipment shortage and continue to produce 25,000 tons of coal per day until September 10th.
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“During this time, the SECMC is required to complete the payment approval from relevant bank or government. Otherwise, Thar Coal Mine will have to face large-scale production cuts or even halt,” said the CMEC.
The company stated that only $22 million has been remitted between April and July this year but the monthly remittance of offshore overdue receivables from SECMC has decreased remarkably since June.
“In June, the offshore overdue receivables just remitted $3.7 million, which was far from the expected payment of $10 million per month. In July, only $3.4 million was received, and in August, the payment of offshore overdue receivables dropped to 0,” stated the CMEC.
The CMEC stated that they had already pointed out in a letter to SECMC that CMEC headquarters will impose 20% and 10% bad debts or provision depreciation treatment on the “overdue receivable” whose aging is more than 1 year and 6 months, respectively.
“In fact, our company has taken the Thar Coal Mine Project as a key object of clearing ‘overdue receivable’, and urged us to complete the collection of ‘overdue receivable’ with aging of more than 6 months before the end of September, and complete the collection of all above-mentioned ‘overdue receivable’ before the end of October,” stated CMEC while sharing the specific schedule of payments.
The CMEC further added that at present the CMEC Thar Coal Mine Project has encountered unprecedented major financial difficulties as huge arrears caused a serious shortage of fund chain and a large amount of service fees and parts and accessories expenses that owe to subcontractors.
“Due to the shortage of spare parts, a large number of equipment has been malfunctioning or even shutting down for a long time. The Thar Coal Mine has been in an imbalance state of stripping and mining.
“Normal coal mining has been seriously hindered, and coal mining tasks have to be reduced to ensure mine operation. If CMEC site team fails to complete the collection task of ‘overdue receivable’, they will face strict assessment and wages will be deducted, imposing a severe test of psychological burden and economic pressure,” stated CMEC.
Therefore, stated CMEC, we sincerely hope that SECMC could fully understand above-mentioned difficulties we are facing, strictly fulfil the payment responsibilities and obligations of an owner, and ensure the smooth operation of the remaining contract period of this project.
Copyright Business Recorder, 2023