Thursday, February 24, 2011

Thar Coal: potential for Indo-Pakistan Collaboration

Thar Coal: potential for Indo-Pakistan Collaboration

There has been a long held desire in India and Pakistan to exploit the geographical advantage and expand trade and investment among the two countries. Most of such hopes have been sacrificed at the altar of political tensions, which have existed due to the Kashmir issue, which has been further complicated by the alleged terrorism episodes India appears to be more enthusiastic in broadening trade ties, however Pakistan links it to the settlement of the political issues. Many people in both the countries argue that strong trade links may create vested interest and stakes in peace and may create the requires rationale and pressure to solve political problems. The debate can be endless, among the unwilling partners.

Lack of availability of suitable projects has also been one of the reasons inhibiting economic cooperation among the two countries. Efforts have been made, in the past and continue to be so, towards building a project portfolio for possible collaboration, if and when political environment improves. SAARC project fund has been commissioning such studies. Reportedly, there is a SAARC energy initiative as well, headquartered in Islamabad for promoting cooperation in Energy sector. Let us explore what can be done in this direction.

Thar Coal and its vast deposits , apart from meeting Pakistan’s energy requirements, may have a potential for building and expanding regional economic cooperation .There are a number of possibilities such as; a)export of Thar coal to coal deficit adjoining states of Rajhastan and Gujrat ;b) India assisting Pakistan in developing and exploiting Thar coal resource; c) India installing coal –fired power plants in its border towns ,and exporting electricity to Pakistan produced by Pakistan exported Thar coal. Let me explain and analyze these propositions a bit.

First on India assisting Pakistan in developing Thar coal resources; India has one of the largest coal industries of the world. It has a coal fired Power Plant capacity of 50,000 MW. India has one of the most efficient coal power plant construction sectors, building coal plants at a capital cost rate of 1100 USD per KW, perhaps even cheaper than or competing with Chinese prices. It can supply consulting, training and even complete plant construction services and equipment supplies. They have experience and exposure in both types of coal; hard coal and our brown coal lignite, although most of their coal is hard coal with high ash content, considered inferior by many international end-users.

Reluctance of western countries with coal is increasing. International financing agencies are under pressure from environmental lobbies not to fund and assist such projects. Chinese appear to be reluctant as well, as reportedly; numerous attempts to revive their interest in Thar have failed. They still appear to have bitter memories from their past involvement in it and the uncooperative conduct of WAPDA that was manifested by the later. India may not be able to provide the full scope of services and may not be ultimately entrusted with a major role. However, it can be suitably involved and usefully inducted in a number of ways.

Secondly, exports of Thar coal to India’s adjoining states of Gujrat, Rajhastan and Punjab. It is a misnomer in Pakistan, that Lignite can be only utilized at mine-mouth. It is true that there is limitation in long-haul and international sea transport. However, in India Lignite is being frequently transferred in large volumes up to a distance of 400 kms. Exports to adjoining states should be very feasible, if the production and transport costs are competitive. One can only be sure of it after having done a feasibility study on the subject. This is an idea worth exploring. India is falling short of coal and has started importing it due to heavy demand. The adjoining states have a deficit of fuel/coal supplies. Exports from Pakistan may reduce traffic congestion caused due to interstate transportation of coal, which is expensive as well in terms of transportation costs.

The third proposition is rather unique, ambitious and extremely profitable, all at the same time. The detail is, that Pakistan exports/barters Thar coal to Indian border towns like Munabao and Bakhsar, the latter may not be more than 50 kms from Thar coal mines. Dedicated coal train can make several trips in a day, carrying 10,000 tons of coal in one trip. India installs Coal power plant(s) in its border town, which would remain a domestic investment in India. India burns Pakistan lignite and transmits the electricity so generated to Pakistan. India is only paid for the capital cost component, as the fuel would remain Pakistan supplied. It can become a total Barter trade, if more lignite is sent/ exported to cover the capital costs afforded by India in supplying electricity to Pakistan. There is a scope for several thousand MW of such projects.

Similar ideas have been put forward earlier as well. There were proposals for exporting electricity to India due to temporary Power excess situation created in the immediate aftermath of HUBCO installation. The proposition in this form may be unique that it offers an energy exchange opportunity. Besides, it is not a temporary surplus. Thar coal deposits are of 200 billion tons and are expected to last for centuries ahead.

Easier said than done, but it can be feasible. As for the security concerns, of large volume of goods transport and human traffic, Thar is a far-off town. Indian nationals may be allowed to come to Thar only through land route or a future direct flight from to and fro Thar. It may remain as good as domestic travel for them. Special immigration rules and status can be created for Thar coal projects. There is no major security installation or threat nearby. So security issues can be managed.

So many people and nations in the world want India and Pakistan to collaborate and work together, that the above propositions may receive instant support, if presented properly. Quite some funding could be garnered under this head. The relevant departments in the two countries and the business groups may like to examine these propositions. It pays to be optimistic, however, naïve it may sound in the beginning.

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