Moaaz Manzoor

Pakistan’s domestic coal production surged by 28 percent in fiscal year 2023-24 as the country’s new Thar-based power plants operated at full capacity, significantly reducing reliance on imported coal and saving precious foreign exchange. The rapid expansion of Thar coal output has shifted Pakistan’s coal balance toward indigenous resources, with imports plunging 39 percent year-on-year amid high international prices and weaker industrial demand.

According to the Pakistan Energy Market Review 2025 by Renewables First, the rise in domestic production was driven primarily by the commissioning and full-year operation of three major coal-fired power projects in Sindh—the Thar Block-1 project with 1,320 megawatts capacity, the Thar Energy Limited plant of 330 megawatts, and the ThalNova Power Thar plant of another 330 megawatts.

These projects, which came online in FY23, reached full operational load during FY24, substantially increasing the offtake of local coal Pakistan’s domestic coal output reached 8.6 million tonnes of oil equivalent (Mtoe) in FY24, up from 6.7 Mtoe a year earlier, while imports dropped to 3.6 Mtoe compared to 5.9 Mtoe in FY23.

The review said that local production growth offset much of the decline in imported volumes, reducing the share of imported coal in total supply to 39 percent. Despite this achievement, imported coal still exerted pressure on the external account because of high dollar-denominated prices and the continued use of imported fuel in several older plants and cement units.

The report pointed out that Pakistan’s total coal reserves are estimated at 186 billion tonnes, with more than 61 percent located in Sindh, primarily in Thar. However, most of these reserves are classified as unverified or hypothetical and remain undeveloped. Proven and developed reserves make up only a small fraction, concentrated mainly in the Thar, Lakhra, and Salt Range coalfields.

Thar’s expansion has nonetheless transformed Pakistan’s domestic energy supply chain, offering a low-cost fuel alternative for power generation compared to imported coal and furnace oil. The country’s coal imports have been falling steadily since FY22 due to surging global prices, forex shortages, and restrictions on opening letters of credit. In value terms, the import bill dropped to 3.6 billion dollars in FY24, down from 5.9 billion dollars a year earlier.

However, the report noted that the decline in dollar value was smaller than the fall in import volumes because of the depreciation of the rupee and the high landed cost of coal. The average import price rose sharply during FY23 before stabilizing in FY24, keeping local market prices under pressure. The review found that industrial coal consumption fell dramatically by 64 percent year-on-year during FY24, due to reduced manufacturing activity, high imported fuel costs, and quality limitations of local coal for certain industrial applications.

Cement production and other energy-intensive industries curtailed their use of coal, replacing it with solar and other cost-effective energy sources. In contrast, coal consumption in the power sector increased and accounted for about 75 percent of total national coal usage as Thar-based plants replaced imported coal generation. The report said that Pakistan’s overall coal consumption has now contracted for three consecutive years, declining by another 3 percent in FY24.

While the power sector’s use of domestic coal grew, other industrial segments remained sluggish. The cement industry, which once consumed 58 percent of total coal, saw its share fall substantially as domestic construction activity slowed and alternative energy technologies became more accessible. Coal pricing trends also reflected changing supply patterns. The review noted that prices in the local market vary by coal grade and region.

Mines such as Sor Range and Degari in Balochistan produce high-volatile bituminous coking coal with higher carbon content and lower impurities, fetching premium prices. In contrast, lower-grade sub-bituminous coal from Sharigh is used mainly for power generation and industrial boilers at lower rates. By FY24, mine-mouth prices in these areas ranged between Rs18,000 and Rs33,000 per tonne, with fluctuations driven by quality, transport costs, and demand.

Experts cited in the report said that while the rapid increase in Thar coal output represents a significant milestone in energy self-reliance, Pakistan still faces challenges in quality management, infrastructure, and environmental sustainability. Local coal has higher moisture and lower calorific value than imported coal, requiring specific plant configurations and blending practices. Continued investment in washing, transportation, and handling infrastructure will be essential to sustain efficiency gains and reduce dependence on imported fuel.

The report emphasized that the long-term success of domestic coal expansion will depend on maintaining financial and environmental balance. As global investors and lenders move away from financing fossil fuel projects, Pakistan will need to balance the benefits of local coal with its commitments to climate goals and renewable energy targets. The development of carbon capture technologies and cleaner combustion systems could help mitigate environmental risks while supporting energy affordability.

According to the Pakistan Energy Market Review 2025 by Renewables First, Pakistan’s coal sector is entering a structural transition where Thar’s domestic output will continue to replace costly imports, strengthening energy security. However, sustained policy support, technical improvements, and fiscal prudence will be crucial to ensuring that the benefits of this transition are not offset by environmental costs or operational inefficiencies.

Credit: INP-WealthPk