TCEB cuts tariff for Thar coal project

KARACHI: State-backed Thar Coal Energy Board (TCEB) has further slashed ex-mine mouth tariff for 7.8 million tons per annum (mtpa) coalmine developed in Thar block-1 by Sino Sindh Resources Limited (SSRL) to $35.84/ton, advising the developer to improve mining technology for optimal production, it was learnt on Saturday.

TCEB determined ex-mine mouth tariff of $35.84/ton for 7.8mtpa SSRL coalmine developed in Thar block-1 as against the proposed tariff of $50.625/ton. TCEB advised developers of Thar coalmines to upscale mining technology configuration to obtain higher production efficiencies and subsequently lower overall cost per ton of mined coal. Thar coal tariff determination committee advised TCEB to initiate similar implementable options for all, present and future mining activities in Thar.

Thar coalfield is estimated to hold a resource potential of 175 billion tons of coal covering an area of over 9,000 square kilometers in the Thar desert in Sindh. The investigated area is covered by stable sand dunes and there are no rock exposures. To establish the coal resources in six selected blocks, a total of 237 holes have already been drilled.

“Appropriate changes to the Thar Coal Tariff Determination Rules 2014 may be incorporated, if necessary, so that developers are obligated to select more efficient mining technologies,” the committee said in a document available with The News.

In April 2017, TCEB awarded a 30-year feasibility stage levelised tariff of $44.36/ton for 7.8 mtpa mine. SSRL, 100 percent owned by Global Mining Company, is developing the project.

SSRL has already achieved financial close for its 7.8 mtpa mine and 1,320 megawatts project (two 660MW mine-mouth power plants) set up with an estimated cost of $1.08 billion.

TCEB said the developers are carrying forward with the same small-scale equipment configuration that may have been applicable for lower annual productions. However, a production of 7.8mtpa justifies scaling up of equipment sizing to obtain higher production efficiencies and subsequently lower overall cost per ton of mined coal.

“Disregarding the comments, SSRL has still opted for lower capital costs (in terms of smaller sized equipment) resulting in higher operational costs and lowering performance efficiencies,” the board said in a document. “This hurts the economy in terms of higher coal prices – it is unsustainable and untenable.”

Tariff determination committee of TCEB did not agree with the sub-optimal configuration of machinery deployment that opted for lower initial capital burden on the project and resulted in higher operating costs and as a result a higher tariff.

“Keeping in view the development needs of Thar coal, SSRL is allowed to move forward with its sub-optimal choice of small-scale machinery and equipment during the development stage of the project,” the board said. “However, it is required to present a detailed plan for phased improvement and transition to optimal adaptation of more efficient large sized excavation, transportation and material handling equipment that offers improvements in cost of coal exploitation resulting in over-all reduction in tariff.”