KARACHI: The country’s heavy use of expensive imported coal for making electricity is draining valuable foreign currency reserves. The cost of making electricity from this coal hit a record high in April.
In April, the cost of power from imported coal jumped to Rs22.84 per kilowatt hour ( KWh), up 15.4% from the same time last year. This makes it the most expensive way to generate electricity.
Despite being a less preferred option, imported coal still plays a big role in power generation. Last financial year, the country spent $1.5 billion on coal imports, and this year’s spending is expected to be similar.
The government plans to switch power plants from imported coal to local coal, but this will take time to implement fully.
Analysts believe the government should stop using imported coal altogether, but the Gwadar Power Plant is still planned to use imported coal according to the latest generation capacity plan.
Coal imports have dropped significantly in recent years due to rising global prices. The country imported 19 million tonnes in FY2020-21, which fell to 18 million in 2021-22, and further halved to 9 million tonnes in the last financial year ending June 30, 2023. This year, coal imports are expected to be around 8-9 million tonnes, according to Farhman Mahmood from Sharmen Securities.
Mahmood stated that the country spent $1.5 billion on coal imports last year and is likely to spend a similar amount this year. Pakistan imports coal from South Africa, Afghanistan, and Indonesia, with South African coal being the most expensive.
Electricity from imported coal is costly compared to local coal, so the government plans to switch to local coal. In April this year, the cost of electricity from imported coal was Rs22.84 per KWh, compared to Rs19.78 per KWh in April last year.
Using imported coal is not only expensive but also harmful to the environment due to industrial waste, transportation issues, and storage problems. Energy analyst Mustafa Amjad notes that imported coal’s negative environmental impact and high costs make it less attractive. Despite plans to switch to local coal, the Gwadar Power Plant will still use imported coal according to the latest policy plan.
