Thursday September 28, 2023

SECMC sees increase in fuel import bill amid LC issues

January 21, 2023

KARACHI: Sind Engro Coal Mining Company (SECMC) has feared about a massive increase in net fuel-based import bill of the country, provided its mining operations remain suspended for a month amid issues related to opening of letters of credit (LCs) for critical spares and payment to foreign contractors.

The company stated that in a communication to Sindh Energy Department, seeking its role for resolving LCs opening and payment to foreign contractor issue. SECMC is producing low cost fuel for power generation in the country and providing 7.6 million tonnes of local coal per annum to three independent power producers (IPPs) based in Thar.

If the mine doesn’t operate for a month, it will increase the net fuel-based import bill of Pakistan by approximately $40 million for the three IPPs.

The company referred to challenges faced in relation to import of critical spares and payment to foreign contractors pointed out that State Bank of Pakistan (SBP) last month had issued a circular to withdraw the restrictions on imports pertaining to HS Code Chapter 84 and 85 and directed the banks to prioritise the imports related to coal for power projects.

However, it added, there was a significant delay in the approval of opening of LCs and foreign remittances, and the mine operations were severely impacted.

SECMC stated that the delays were causing incurring demurrages charges, liquidated damages, and penalties, which could result in reputational damage and additional costs.

“We are continuously engaged with banks and SBP for the resolution, but significant amount is still pending”, it said.

SECMC requested Sindh Energy Department to request the central bank to direct all the banks to immediately clear outstanding dues of foreign operators, including China Machinery Engineering Corporation and China Everest Development International Limited, which were in approval since April 2022.

In addition to that, the company said it also needed approvals for the opening of its regular LCs (followed by remittance under LCs) to ensure continuous supply of tyres and spares parts for its mining equipment. “In addition to operations, SECMC is also initiating the mine expansion project so that IPPs currently operating on imported coal can be converted to local coal, hence reducing the forex burden further.”

The coal mining company also requested for a SBP approval for establishing LCs for additional mining equipment, whose total estimated value of imports (equipment and spares) for the coming year was approximately $65 million and services of approximately $35 million.

“Any delay in importing equipment will have a direct impact on the timing and the cost of the phase III project.” the company said.