Chinese power plant operators in Pakistan will be asked to use coal from Pakistan’s Thar region rather than imported coal, starting this month, Pakistan’s power minister said on Sunday.
In an upcoming trip to Beijing, Pakistan’s delegation will also attempt to re-profile the country’s energy sector debt, Awais Leghari, head of the energy ministry’s power division, told Reuters.
China has a significant presence in Pakistan’s energy sector, setting up more than $20bn (145.46bn yuan) worth of energy projects in the neighbouring country.
“One of the key purposes of going along is the conversion of our imported coal units to the local coal. That would have a huge impact on the cost of energy, of power in the near future. So that is one of the biggest [items on the] agenda,” Leghari said in an interview with Reuters.
He added that changing the source of coal would benefit Chinese-owned power plants in Pakistan by reducing pressure on Islamabad’s foreign exchange reserves, making it easier to repatriate dividends and offering improved returns in dollar terms.
The transition could help to bring down the cost of electricity in Pakistan, with the potential to save the country more than Rs200bn ($700m) a year in imports.
In May, the International Monetary Fund urged Pakistan to bring strong reforms to its energy sector to restore its financial viability. The country’s power sector has been hampered by high rates of power theft and distribution losses, resulting in large debts across the production chain.
Last year, working and middle class Pakistani households were affected by a previous International Monetary Fund bailout that led to an increase in power tariffs, which in turn led to higher energy bills as part of the funding programme that ended in April, according to Reuters.
Despite high summer temperatures, annual power use in Pakistan is expected to fall this year for the first time in 16 years as higher tariffs curb household consumption.
“We have seen a shrinking demand trend in the past year or year and a half, and we are expecting this to continue unless we rationalise the price of power,” Leghari said.
