A Chinese company operating a mine in Thar, which powers coal plants and produces 1,360 megawatts of energy, has reduced its production by 50% due to non-payment of outstanding debts worth $60 million.
The China Machinery Engineering Corporation (CMEC) apprised the Sindh Engro Coal Mining Company (SECMC) that it will limit its operations leading to a complete mining operations halt within one month. These two companies work under an offshore agreement on an open-pit lignite mine in Block-II of the Thar coalfield.
The SECMC highlighted the issue and consulted Pakistan’s topmost of fiscal and monetary authorities but they too have been unable to help the operator as they are reluctant to sign off the pending payments due to a shortage of foreign exchange.
The SECMC is backed by the provincial government of Sindh and owes the Chinese contractor dollar-denominated payments under the heads of operation and maintenance (O&M) as well as engineering, procurement and construction (EPC) for the second phase of Block-II.
Since the loan programme with the International Monetary Fund (IMF) remains on hold, Pakistan continues to face severe dollar crunch. The government to address the issue of dwindling forex reserves has placed formal and informal restrictions on the outflow of dollars in order to survive the liquidity crisis.
The Chinese contractors are concerned that they have not received any payment since May 2022.
Officials said the Sindh-backed mining company is cash-rich but the federal government, through the finance ministry and the Pakistan central bank, is not allowing SECMC to convert the local currency into dollars for onward payment to the foreign contractor.
The mining company registered a profit of PKR8.47 billion in 2022 and its current assets, consisting of cash and other assets that can be converted to cash within a year, stood at PKR 104.4 billion at the end of 2022, up by 38% from a year ago.
The Chinese contractors said they are suffering from severe financial shortages due to the debt because the payment they are receiving are not enough for running the mining operations and they also have to pay subcontractors and suppliers.
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