Power Division reform in Thar Coal Mining to save $30M annually, cut power costs

ISLAMABAD, Apr 01 (APP):The Power Division has undertaken a significant reform to address operational inefficiencies in Thar coal mining, a move expected to generate annual foreign exchange savings of up to $30 million while significantly reducing electricity generation costs.

The initiative, undertaken under the leadership of Prime Minister Shehbaz Sharif and strategic direction of Federal Minister for Power Awais Ahmed Khan Leghari, said a press release issued on Wednesday.

This initiative is projected to deliver substantial national savings by drastically reducing diesel consumption, thereby cutting import bills and lowering electricity costs.

The reform is expected to save approximately PKR 25 million per day in diesel costs, translating into annual foreign exchange savings of USD 25–30 million by reducing reliance on imported fuel. Furthermore, the cost of coal is projected to decrease by around USD 0.7 per ton, leading to a significant reduction in electricity generation costs.

The cost of power generated through diesel for mining operations, currently around US cents 33 per kWh, will decline to US cents 13 per kWh (or even lower as per B4 tariff)—a reduction of over 60 percent.

A key inefficiency was identified in the mining operations, particularly in the process of water management during coal extraction. Historically, diesel-powered systems were extensively used for dewatering and other mining activities.

On average, around 35,000 liters of diesel per day were consumed solely for dewatering, while total diesel consumption across mining operations ranged between 200,000 to 250,000 liters per day. This heavy reliance on imported diesel substantially increased the cost of coal production. As these costs are treated as pass-through items, the financial burden was ultimately borne by electricity consumers in the form of higher tariffs.

Recognizing the economic and environmental implications, the Power Division, under clear policy direction from the Federal Minister, engaged key stakeholders including the Thar Coal Energy Board (TCEB), National Grid Company (NGC), and HESCO to develop a sustainable alternative.

Congratulations are due to TCEB, NGC, and HESCO for their collaborative work in making this transition possible. Following detailed deliberations, the management of Thar Block-I and Block-II agreed to transition mining operations from diesel-based systems to grid-powered infrastructure by investing capital for this intervention.

This transition involves an investment of approximately PKR 5.3 billion for the development of grid stations and associated transmission infrastructure, enabling connection with HESCO’s 132 kV Islamkot grid station and facilitating an offtake of around 60 MW of electricity to support mining operations.

This pre-planning reflects the Power Division’s foresightedness in securing long-term savings—a decision proving vital amid today’s energy crisis stemming from the Middle East situation.

In addition to economic gains, the environmental benefits are also noteworthy. The initiative is expected to reduce carbon emissions by approximately 80,000 tons annually. Moreover, further directions have been issued to transition diesel-powered mining vehicles to electric vehicles, which will enhance efficiency and contribute to long-term decarbonization objectives.

This reform represents a practical and impactful step toward improving efficiency in Pakistan’s energy sector. By replacing expensive diesel-based operations with grid-supplied electricity under the strategic oversight of the Federal Minister for Power, the government is not only reducing the cost of power generation but also alleviating pressure on foreign exchange reserves. Importantly, a significant portion of the mining-related energy demand—estimated at around 60 MW—will be shifted to the national grid, which shall improve overall system utilization while ensuring that these efficiency gains are ultimately passed on to consumers in the form of more affordable and sustainable electricity.