Inching towards a coal crisis?

Critical Cash Flow Crisis: SECMC’s Struggle Threatens National Energy Security

On top of all the economic and financial crises facing the country, it seems now we have a coal crisis on our hands as well. It turns out that the delay in clearing the outstanding balance of Rs55 billion owed by power plants to Sindh Engro Coal Mining Company Limited (SECMC) has not just caused “severe cash flow issues”, according to the company, but also threatens a shutdown of operations. And that will force the government to fetch coal from the international market at approximately $50 million every month.

In a worrisome development, SECMC faces a severe cash flow crisis, exacerbated by unsuccessful pleas to the Sindh energy secretary for intervention. With no indication of prompt action from federal finance and energy ministries, concerns rise about a potential escalation of the issue, reflecting poorly on all involved parties.

The urgency of timely disbursement of payments becomes evident, considering its crucial role in sustaining operations and promoting the use of indigenous Thar coal. This aligns with the national goals of energy security and conserving foreign exchange reserves, yet the current situation puts these objectives at risk.

SECMC, a significant player in the energy sector, provides 7.6 million tonnes of indigenous Thar coal annually to power plants, contributing to what authorities term “affordable energy generation.” Failure to ensure timely payments may result in a substantial monthly drain of $50 million from national reserves, affecting end users and potentially causing unrest across the country.

Despite the National Transmission and Dispatch Company recognizing indigenous coal power plants as cost-effective energy producers, SECMC grapples with cash flow issues impacting operations, contractor payments, provincial government royalties, and the procurement of essential fuel, spares, and equipment. The larger circular debt issue remains unsolved, raising questions about the government’s urgency in addressing these critical matters.

As the situation unfolds, it becomes clear that time and funds are running out for SECMC. The lack of urgency in resolving payment issues and the broader circular debt problem poses a significant threat to the company’s viability and, consequently, national energy security.

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