EDITORIAL: On top of all the economic and financial crises facing the country, it seems now we have a coal crisis on our hands as well. It turns out that the delay in clearing the outstanding balance of Rs55 billion owed by power plants to Sindh Engro Coal Mining Company Limited (SECMC) has not just caused “severe cash flow issues”, according to the company, but also threatens a shutdown of operations. And that will force the government to fetch coal from the international market at approximately $50 million every month.
If that isn’t bad enough, it seems the company’s desperate attempts to get the Sindh energy secretary to intervene have not met with much success either. There’s still no word on whether federal finance and energy ministries are prioritising this matter now or if they will wait for the fire to spread, as usual, before scrambling to put it out.
Needless to say, of course, that considering the health of the country’s financial reserves as well as the state of its energy sector, all this reflects very poorly on all parties concerned. Surely, the chain of command that runs from the energy ministry to the top of the government understands that timely disbursement of such payments is essential for sustaining operations and advancing the use of indigenous coal, which is in line with the twin national goals of energy security and conservation of foreign exchange reserves.
SECMC, a joint venture between the Sindh government, Engro Energy Limited, and affiliates, reportedly provides 7.6m tonnes per annum of indigenous Thar coal to three power plants, addressing the power sector’s problems and contributing to what authorities still call “affordable energy generation”. And at a time when most of the country’s energy consumers do not feel it is “affordable” anymore, failure to ensure said payment will blow another $50m per month hole in national reserves, a lot of which will definitely be transferred to end users, stoking defaults and unrest up and down the country.
The National Transmission and Dispatch Company’s (NTDC’s) Merit Order List recognises indigenous coal power plants as producers of the most cost-effective energy, which makes SECMC’s troubles that much more shocking. So, here’s a company, whose operations are essential to the nation, yet it faces cash flow issues that impact its work, payments to contractors, royalty to the provincial government, and procurement of crucial fuel, spares and equipment. All this because no administration could get a handle on the circular debt in all these years.
It only takes putting two and two together to get a picture of what is about to happen. There’s clearly not enough urgency in the government to push this payment through or solve the larger circular debt issue, and SECMC is running out of time and funds to stay afloat.
Copyright Business Recorder, 2023