cluster study
TRANSCRIPT
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COAL MINING DISTRTICT JAMSHORO, SINDH
Cluster Study
Final Report
Mineral Transformation Plan Vision 2025 Planning Commission, Ministry of Planning, Development & Reform,
Government of Pakistan.
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Contents 1. ABOUT THE STUDY.................................................................................................................................. 6
2. DESCRIPTION OF THE CLUSTER ......................................................................................................... 7
2.1. Introduction ....................................................................................................................................... 7
2.1.1. Strategic Location of the Cluster ........................................................................................ 8
2.2. Situational Analysis ....................................................................................................................... 10
2.2.1. Enterprise Base...................................................................................................................... 10
2.2.2. Products ................................................................................................................................... 12
2.2.3. Production Statistics ............................................................................................................ 12
2.3. Institutional Framework ................................................................................................................ 12
2.3.1. Sindh Minerals Development Department ...................................................................... 12
2.3.2. Environment Protection Agency ....................................................................................... 13
2.3.3. Energy Department, Government of Sindh ..................................................................... 14
2.3.4. SMEDA Sindh ......................................................................................................................... 14
2.3.5. Indus Coal Mine Owners Association .............................................................................. 14
2.4. SWOT Analysis ............................................................................................................................... 15
2.4.1. Strengths ................................................................................................................................. 15
2.4.2. Weaknesses ............................................................................................................................ 15
2.4.3. Opportunities .......................................................................................................................... 15
2.4.4. Threats ..................................................................................................................................... 15
3. DEMAND AND SUPPLY GAP ANALYSIS - LOCAL MARKET ....................................................... 16
3.1. Quantum of Supply ........................................................................................................................ 16
3.2. Supply Trends ................................................................................................................................. 16
3.3. Quantum of Demand ..................................................................................................................... 17
3.4. Demand Trend ................................................................................................................................. 17
3.5. Key Market Segments ................................................................................................................... 18
3.6. Potential Niche Markets ................................................................................................................ 18
3.7. Expected Growth of Cluster Products ...................................................................................... 18
4. DEMAND AND SUPPLY GAP ANALYSIS - EXPORT MARKET .................................................... 19
4.1. Quantum of Supply ........................................................................................................................ 19
4.2. Quantum of Demand ..................................................................................................................... 20
5. CLUSTER GAP ANALYSIS IN THE LIGHT OF INTERNATIONAL BEST PRACTICES ............. 20
5.1. Reserves Maping and Estimation .............................................................................................. 20
5.2. Infrastructure ................................................................................................................................... 21
5.3. Technology ...................................................................................................................................... 22
5.4. Human Resource ............................................................................................................................ 28
5.5. Access to Finance .......................................................................................................................... 30
6. KEY ISSUES ............................................................................................................................................. 31
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6.1. Regulatory ........................................................................................................................................ 31
6.2. Infrastructure ................................................................................................................................... 31
6.3. Technology ...................................................................................................................................... 31
6.4. Financing .......................................................................................................................................... 32
6.5. Human Resource ............................................................................................................................ 32
6.6. Marketing .......................................................................................................................................... 32
6.7. Social ................................................................................................................................................. 32
6.8. Environment .................................................................................................................................... 32
7. PROPOSED INTERVENTIONS ............................................................................................................. 33
7.1. Regulatory ........................................................................................................................................ 33
7.2. Infrastructure ................................................................................................................................... 33
7.3. Technology ...................................................................................................................................... 34
7.4. Fianance ........................................................................................................................................... 34
7.5. Human Resource ............................................................................................................................ 34
7.6. Marketing .......................................................................................................................................... 34
7.6.1. Tapping buying houses, agents, trade councils and associations .......................... 35
7.6.2. Trade Exhibitions .................................................................................................................. 35
7.7. Social and Environmental ............................................................................................................ 35
8. Economical, Social, and Environmental Impacts ........................................................................... 36
8.1. Economic Impacts ......................................................................................................................... 36
8.2. Environmental Impacts ................................................................................................................. 36
8.3. Social Impacts ................................................................................................................................. 36
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List of Tables
Table 1: Coal Reserves in Sindh ............................................................................................................................. 7 Table 2: Lakhra Coal Cluster Summary ............................................................................................................... 10 Table 3: Detail Of Mining Companies In Lakhra ................................................................................................. 11 Table 4: Coal of Lakhra- Chemical Analysis ....................................................................................................... 12 Table 5: Production Statistics of Mines ................................................................................................................ 12 Table 6: World's Top 10 Coal Exporters- Year 2017 (Value: Billion USD) ........................................................ 19 Table 7: World's Top Importers of Coal (Value:Millions USD) .......................................................................... 20
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List of figures
Figure 1: Coal Miniing Areas in Sindh ................................................................................................................... 8 Figure 2: Coal Fields of Sindh ................................................................................................................................ 8 Figure 3: Coal Mines of Lakhra .............................................................................................................................. 9 Figure 4: Minerals Department of Sindh .............................................................................................................. 13 Figure 5: Lakhra Coal Supply Chain .................................................................................................................... 16 Figure 6: Consumption And Production Of Coal In Pakistan .............................................................................. 18 Figure 7: Coal Mining Infrastructure In China .................................................................................................... 21 Figure 8: Open Pit Mining In Thar, Sindh ............................................................................................................ 22 Figure 9: Inside Coal Mines in Developed Countries ........................................................................................... 23 Figure 10: Remot Controlled Mining in Advanced Coutnries .............................................................................. 23 Figure 11: Machinenry in Developed Countries ................................................................................................... 24 Figure 12: Transportation Of Coal........................................................................................................................ 24 Figure 13: Drift Mine Enterance In Lakhra .......................................................................................................... 25 Figure 14: Shaft Mining In Lakhra ....................................................................................................................... 25 Figure 15: Manual Coal Handling In Lakhra ........................................................................................................ 26 Figure 16: Manual Coal Drilling .......................................................................................................................... 26 Figure 17: Coal Transportation (Landhi) .............................................................................................................. 27 Figure 18: Transportation- 30 Tons Per Truck ..................................................................................................... 27 Figure 19: Manual Handling Of Coal ................................................................................................................... 28 Figure 20: Labor At Lakhra .................................................................................................................................. 29 Figure 21: Coal Loading ....................................................................................................................................... 29 Figure 22: Drinking Water.................................................................................................................................... 30
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1. ABOUT THE STUDY
This specific document aims to study the Coal Cluster of Lakhra, Jamshoro District,
Sindh.
The survey conducted mainly based on Focus Group Discussions (FGDs), Key informant
discussion, and one to one interviews of SMEs in the business of mining, processing and
trading by utilising random sampling techniques. The inputs were analysed by using
Statistical Package for Social Sciences (SPSS) followed by the SMEDA team’s review,
and expert opinion by geologists and external management consultants.
The tools used in the study were:
Questionnaire for Cluster Associations
Questionnaire for Coal miners of Jamshoro District
Questionnaire for Coal traders of Jamshoro District
SPSS (Data Analysis Software)
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2. DESCRIPTION OF THE CLUSTER
2.1. Introduction
Sindh province has the estimated coal reserves of 185.3 billion tons1. It accounts for over
99% of Pakistan’s total resrves of 186,476 Million Tons. Following are the coal bearing areas
of Sindh:
TABLE 1: COAL RESERVES IN SINDH
According to the representatives of Indus Coal Mine Owners Association, initially coal in
Lakhra was discovered in 18532. Large scale geological surveys were carried out to
ascertain the coal reserves. Exploration of coal for power generation was began in 1960s
when Geological Survey of Pakistan (GSP) and United State Geological Survey (USGS)
conducted a systematic geological investigation of the area. On the basis of the survey
results, it was found that Lakhra coal is suitable for power generation.
Today with estimated reserves of 1.328 billion tons spread over an area of 1,3093 Square
kilometers, the coal mining cluster of Lakhra has become the major source of livelihood
and provides employment to almost 60,000 people directly or indirectly. Sindh
Governemnt collects royalty on the mining of coal on the basis of Rs. 60 per ton, the
annual royalty is estimated to be around Rs. 100 million.
1 Energy Department, Sindh 2 United States Geological Survey Publications (https://pubs.er.usgs.gov/https://pubs.er.usgs.gov/) 3 Coal Mine Owners Association
S. No Location Reserves (Million Tons)
1 Thar 175,505
2 Lakhra 1,328
3 Badin 1,358
4 Thatta 7,112
Sub-total 185,303
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FIGURE 1: COAL MINIING AREAS IN SINDH4
FIGURE 2: COAL FIELDS OF SINDH5
2.1.1. Strategic Location of the Cluster
Khanot is a town in district Jamshoro. Khanot is famous because of coal reserves in Lakhra.
The Lakhra coal-field in Jamshoro district lies 16-KM to the west of Khanot railway station
4 Geochemical and organic petrographic characteristics of low-rank coals from Thar coalfield in the Sindh Province, Pakistan published in Arabian Journal of Geosciences 5 Source: Harnessing of Coal Resources of Sindh Provinces- 2003 (Sindh Coal Authority)
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on the Kotri-Dadu section of the Pakistan Railways. It is well connected with Karachi and
Hyderabad through roads and railways. The cluster is at a distance of 75-KM from coal trade
market Hala Naka Hyderabad and 193-KM from Karachi.
FIGURE 3: COAL MINES OF LAKHRA
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Situational Analysis
2.1.2. Enterprise Base
Out of total reserves of 1,328 million tons, about 244 million tons are measured, 629 million
tons indicated, and 455 million tons inferred. Most of the coal extracted, Lakhra is sold to
local brick kilns and cement plants and some quantity goes to Lakhra power plant.6
As per the data provided by Indus Coal Mine Owners Association Lakhra, there are 50
operational and legal mining leases of coal in Lakhra. The number of operational quarries per
mine ranges from 2 to 20 and the average is 6 quarries per mine.
SMEDA’s survey of mining companies indicates that on average it costs the companies Rs.
1.6 million and Rs. 5 million for mining area development and mines access roads
construction respectively.
The number of enterprises, production, employment and investment is summarized in the
following table.
TABLE 2: LAKHRA COAL CLUSTER SUMMARY
Sub Sector Units Employment Annual Production Total Investment
Mining 50 Mines 60,000 People 1.2 Million Tons Rs. 1.0 Billion
Mining in the area is done undergrounded. Arouund 95% of mining in the cluster is carried
manually thus extraction/production of mining cluster varies greatly.
6 LCDC SINDH
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TABLE 3: DETAIL OF MINING COMPANIES IN LAKHRA
S.No Business Name Date of
Establishment Address
1 Super Coal Mines 1991 New Truck Stand Hala Naka plot #86
2 Sabiha Coal Mining 2007
441/501 opposite FG College Saddar,
Hyderabad
3 Habib Ullah Coal Mining
Company 2001 D-113Auto Bhan Road Latifabad, Hyderabad
4 Sindh Coal Mines 1976
Sindh Coal Mine near Al Habib Bank, Hala
Naka
5 Sanam Coal Mines 2006 41/501 oppsite FG College Saddar, Hyderabad
6 Qadir Coal Mines 1998
Abdul Qadir Coal Mines near Salateen hotlel,
Hala Naka
7 Zarnawaz khan Coal Mines 2017 Shop 9,10 Hala Naka, Hyderabad
8 Momal Coal Mines 2008 H 493/3 Doctors Line Saddar, Hyderabad
9 Sindhu Coal Mines 2008 H 493/3 Doctors Line Saddar, Hyderabad
10 Mustafa Coal Minnig
Compny 2003 17/18 Doctor Line Saddar, Hyderabad
11 Qazi Shamsudin Coal Mines 2007 41/501 oppsite FG College Saddar, Hyderabad
12 Sakina Coal Mines 2007 41/501 oppsite FG College Saddar, Hyderabad
14 Mashallah Coal Mines 1962 Shop No: 88 Hala Naka, Hyderabad
15 Kashif Coal Mines 1996 155-A Block-C,unit 2, Latifabad, Hyderabad
16 Shahid Coal Mines 1987 155-A Block-C,unit 2, Latifabad, Hyderabad
17 Raisani Coal Mines 2000
Near Sagar Resthouse Latifabad #03,
Hyderabad
18 Bhittai Coal Mining
Company 1998
H/no 422/501 oppsite FG College Saddar,
Hyderabad
19 Hussain coal mine 1991 Plot No: 4 Hala Naka, Hyderabad
20 Momal Coal Mines 2009 H.493/3 Doctors Line Saddar, Hyderabad
21 Indus Coal Mines 1968 B.77-C Block-D unit 6 Latifabad, Hyderabad
22 Muneer Ahmed Coal Mines 1972 Motimal Plaza Gari Khata, Hyderabad
23 RS Rajar Coal Mines 1991 H 493/3 Doctors Line Saddar, Hyderabad
24 Bismillah Coal Mine 1996 Haji Zareef Hotel Hala Naka, Hyderabad
25 Universal Coal mine 1973 Plot No: 161 Hala Naka, Hyderabad
26 Sanjarani coal Mines 1998 Plot No: 161 Hala Naka, Hyderabad
27 H.M. Iqbal Coal Mines 1978 Near Latif Dair Latifabad 7, Hyderbad
28 Balochistan Coal Mines 1999 Blocke Unit No: 09 Latifabad, Hyderabad
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2.1.3. Products
Lakhra coal cluster is famous for lignite type coal extracted from mines. According to the
report published by Sindh Coal Authority and as per discussions with industry players, the
chemical composition of the coal is defined below:
TABLE 4: COAL OF LAKHRA- CHEMICAL ANALYSIS7
Description Content
Moisture (AR) 28.9%
Ash (AR) 18%
Volite Matter (AR) 27.9%
Fixed Carbon (AR) 25.2%
Sulphur (AR) 4.7% to 7%
Heating Value (Av) 4,622-7,554 Btu./Lb
2.1.4. Production Statistics
The coal cluster of Lakhra production is comprised of mining companies. Production at
mines is directly subjected to demand and supply equilibrium besides law and order situation.
When there is a greater demand for the coal, the miners fulfill demand in huge volumes.
Recently, demand is reduced due to Punjab Government’s ban on bricks kilns.
TABLE 5: PRODUCTION STATISTICS OF MINES
Type of Mining No. of
Operational
Mines
Average Annual
Production
Total Annual
Production
Under ground mining 50 9,861 Tons 1.2 Million Tons
The field survey has indicated that on average each mine has 06 hours shift per day with the
daily production of around 4000 tons. On account of the average 7%, the annual wastage is
estimated to be 0.1 million tons. The average unit cost of coal is Rs. 4,000 per ton, whereas,
the selling price ranges from Rs. 4,500 to 5,000 per ton.
2.2. Institutional Framework
Different institutions play their role in coal mining and processing activities in Sindh.
Following are such institutions.
2.2.1. Sindh Minerals & Minerlas Development Department
Pursuance to the implementation of National Mineral Policy (NMP) and directives of the
Chief Executive of Pakistan on 04.06.2001, the Sindh Mines & Minerals Development
Department was created vide notification dated 22.08.2001. The creation of the M&MD is
based on NMP 1995 in line with the Australian Technical Aid (AusAid) consultant’s report,
1997.
7 Source: Harnessing of Coal Resources of Sindh Provinces- 2003 (Sindh Coal Authority)
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Main responsibility of M&MD is the development of mineral resources. It also includes the
granting of licenses and leases for mining, regulating & monitoring mining operations
activities in the mineral sector, and collection of royalty. Furthermore, this department also
holds negotiations of mineral agreement & consultation with the Federal Government,
whenever considered necessary by the Mineral Investment Facilitation Authority (MIFA).
attainment of its objectives.
Previously, this department had a responsibility of coal mining regulations and development
but now the subject comes under the domain of Energy Department, Sindh.
2.2.2. Environment Protection Agency (EPA)
It administers and implements the Act 1997, its main functions are to implement rules and
regulations, review of IEE/EIA, preparation of procedures and guidelines. Preparation
revision and enforcement of NEQS (industries, municipalities, vehicular emission). EPA
establishing and maintains laboratories, certification of laboratories for conducting "tests and
analysis". It also assists local Councils/Authorities, Govt. Agencies in execution of projects.
It helps Government to establish a system for monitoring to end pollution. It further arranges
some sort of training functionaries and industrial management to provide information and
education to the public on environmental issues. It is also the duty of Government
Department to publish the annual Environment Report including Survey & Qualitative &
Quantitative data on air, soil, water, industrial/municipal and traffic emissions.
Director Licensing
Director Exploration
Admin & Accounts
Chief Inspector
Mines
Commission & Mines
Mineral Testing
Laboratory
SECRETARY MINERALS
Director General
Mines & Minerals
Deputy Secretary
Section Officers
FIGURE 4: MINERALS DEPARTMENT OF SINDH
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2.2.3. Energy Department, Government of Sindh
The Energy Department of Sindh plays major role in coal sector due to the huge coal reserves
found in Sindh with a potential of power generation. Some functions relevant to coal mining
are stated below:
Administration of the Electricity Act, 1910 and other Acts on the subjects.
All relevant matters under laws relating to petroleum, power, energy and gas.
Development of Power Generation by exploiting oil, gas and hydel resources.
Review and updating of regulatory framework to promote fast-track investment in
energy projects.
Public Private Partnership for energy production, conservation, efficiency and audit.
Development of Coal Resources.
Grant of Licenses, Permits, Leases for Coal Mining.
Inspection of Coal Mines.
Regulation & Monitoring of Coal Mining Operations, Coal Gasification, Coal Gas
extraction, Coal to Liquids and other auxiliary activities and collection of royalties
thereof.
Negotiation of Agreements and consultations with the Federal Govt. if and when
considered necessary.
Negotiations/Consultations with Private Investors.
Maintenance of up to date master Plans of Exploration Licenses, Permits and leases
granted renewed, assignment and surrenders including their publication in the official
Gazette.
Import, purchase, distribution and price fixation of coal and coke.
Coal based energy development and coal based power generation.
The Energy Department is having Directorate General of Coal Mines, Directorate of Coal
Energy Development and Inspectorate of Coal Mines to govern the sector and manage the
coal based power generation projects. It also serves as Secretariat of Mineral Investment
Facilitation Authority (MIFA), Sindh Coal Authority (SCA) and Thar Coal & Energy Board
(TCEB).
2.2.4. SMEDA Sindh
SMEDA is a federal government organization working under Ministry of Industries and
Production for the facilitation and development of small and medium enterprises in Pakistan.
SMEDA plays a very important role in long term development and growth of the Coal
mining cluster Lakhra. SMEDA provides help desk facilitation, legal facilitation, capacity
building, networking and linkages development directly to the SMEs.
2.2.5. Indus Coal Mine Owners Association
Indus Coal Mine Owners Association is a registered association of all mine owners across
Sindh representing the Lakhra coal mining sector in the province. This association has
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members from Jahmpir, Thar, and Sunda coal clusters as well. The association represents
stakeholders from coal mining.
2.3. SWOT Analysis
2.3.1. Strengths
Huge reserves of Lignite Coal.
Demand from large number of brick kilns and cement factories.
Availability of Low-cost Mining Labor.
2.3.2. Weaknesses
Delaying tactics in issuance of exploration licenses.
Low quality yields lower prices with lesser profit margins.
Unavailability of electricity and worst infrastructure makes the per square feet cost at
Rs. 7,000 as compared to that of Rs. 2,500 per sq.ft. for Punjab.
Bad debts by brick kilns
Unavailability of skilled labor.
Mixing of dust in coal by traders.
Lack of social benefits and facilities to mine labor.
2.3.3. Opportunities
Comparative closeness to international market (CPEC)
High demand in construction sector due to CPEC projects
Large andeEstablished world markets.
Increasing demand and supply gap of electricity in pakistan
2.3.4. Threats
Ever growing environmental concerns.
Imported coal
Ban on the use of coal in brick kilns
Improper safety measures
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3. DEMAND AND SUPPLY GAP ANALYSIS - LOCAL MARKET
More than 90 percent of the coal found in Lakhra, is being utilized in kilns and rest is used by
cement factories to blend it with imported coal to reduce the production cost. Domestic coal
is blended with imported coal in small proportion, which is necessary for smooth operation of
the plant. As per discussion with industry experts, the imported coal’s cost ranges from Rs.
3,150 to 3,510 per ton while local cost varies between Rs.1,300 to 2,500 per ton.
FIGURE 5: LAKHRA COAL SUPPLY CHAIN
3.1. Quantum of Supply
Most of the SMEs in the mining industry sell the coal directly to sales agents and middlemen.
Similarly, they directly sell it to the wholesalers and consumers in Punjab. The bargaining
prices depend on the quality of coal and demand and supply trends in the market.
Likewise, the coal mining in Lakhra is also contributing to the provincial economy of Sindh
to maximum extent. The provincial government, on the account of royalty, collects Rs. 60 per
ton, a portion of which is given to locals on lease basis.
3.2. Supply Trends
Supply from mines is largely associated with better law & order situation, free flow on access
roads and enhanced processing activities. More than 90% coal extracted from Lakhra is used
in brick kilns of Punjab. Currenty, the average production of coal is around 1.2 million tons
per year. In 2018, the cluster registered the production of 1.2 million tons.8
8 Energy Department, Government of Sindh
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The supply of coal is easily available to consumers as well as to traders. Demand from
exporters and consumers is easily fulfilled on time because huge reserves are available.
Maximum life of any mine is about 8 years and minimum up to or three years.
3.3. Quantum of Demand
Quantum of demand here refers to total cumulative demand for coal, domestic market.
Supply of coal is constant but demand is inconsistent. Demand of Lakhra coal mostly
depends upon brick kilns of Punjab. Development work in Punjab increases the demand of
the coal. Consumption of the coal mainly depends upon kilns in Punjab. Due to roads and
infrastructure problems, their supply is delayed, otherwise it is manageable. Sahiwal,
Sadiqabad, Lahore, Rahimyar Khan, Chichawattni, Gujranwala, and Faisalabad cities of
Punjab are the main markets of Lakhra coal.
3.4. Demand Trend
Main recipients of Lakhra produced coal are the bricks kilns in Punjab and few cement
industries acroos Pakistan. However, poor law and order situation in Lakhra also affects the
coal business negetivly. The ban imposed by the government of Punjab. However, local
production of coal is still less than the cosumtion. Pakistan imports coal in huge quantity to
meet the domestic demand. The below chart demonstrates the production and consumtion
trends of coal in Pakistan.
0
0.5
1
1.5
2
2.5
3
3.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Coal production in Lakhra (Million Tons)
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FIGURE 6: CONSUMPTION AND PRODUCTION OF COAL IN PAKISTAN (MILLION TONS)
3.5. Key Market Segments
Most of coal in Pakistan is used in making bricks and more than 90 percent of it extracted in
Lakhr and is used in kilns. Both mining and trading are observed in whole Pakistan, because
coal reserves are available in every part of Pakistan. Furthermore, it depends upon quantity of
reserves and its utilization. Semi wholesalers and traders are the key market segments.
Cement factories, housing, construction, consumers, and end users are also considered as the
market segments as per their demand.
3.6. Potential Niche Markets
Punjab is the main market of Sindh’s coal. However, coal is also available in KP, Baluchistan
and even in Punjab. If washing plants are installed in Pakistan or all power generation
companies and industrial units are designed on the basis of coal found in Pakistan will bring
maximum increase in consumption of domestic coal.
Alongwith the existing corporate customers, the plaster of paris factories emerged as niche
markets. The use of coal in sugar industry it can save Rs. 9 million bagasse that can be
utilized to produce medium density fiber board. Refined coal tar can be used in the
manufacturing of a range of chemicals including pitch, creosote oil, naphthalene, phenol,
pyridine, benzene, toluene, xylene, ethylene, propylene, polyesters, plastics, synthesis gas,
acetic acid, acetican hydride. Large number of chemical and fuel can also be produced
through the gasification of coal. In late 1950's, Pak-American Fertilizers, Iskandarabad,
Daudkhel was based on gasification technology supplied by Lurgi to produce ammonia and
ammonium sulfate fertilizer. It is time to develop coal-fired power plants to lessen
dependence on imported fuel and also to cut the cost of power production for the benefit of
the industries, trade and individual consumers.
3.7. Expected Growth of Cluster Products
Coal mining sub sectors can attain a good market share in domestic and export market, if
appropriate technological advancement and coal washing plants are insatlled. The demand
and supply trend in local market suggest that Lakhra coal cluster is expected to grow at large.
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Consumption Production
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Reserves of coal in Lakhra are abundant, but the quality of coal low down demand in
domestic as well as in international market. If washing plants are installed in Pakistan, the
quality of coal can be improved. Furthermore it can also be used in power generation plant for
making electricity. It will reduce huge burden of oil and coal import on Pakistan to maximum
level. Advanced technology is the need of the hour at mining sub sector. Almost 50% coal is
wasted due to convenstional methods of mining.
Poor infrastructure also severely affecting the trading sub-sector of the coal mining. All mine
owners have their sales offices in the city and they sell their coal to sales agents. Who then
sell it to traders and end users.
4. DEMAND AND SUPPLY GAP ANALYSIS - EXPORT MARKET
Due to poor quality exports of the coal are negligible. The coal found in Lakhra, is lignite. It
contains large quantity of Sulphur. Large quantity of Sulphur in lignite devalues the quality
of coal. If washing plants are installed in the cluster, then the value of coal can be improved.
The large reserves of coal can enlist Pakistan in the list of top world coal exporters and
reduce import burden on the economy.
4.1. Quantum of Supply
The global coal exports analysis is based on information extracted from Trade Map database,
International Trade Center (ITC) and U.S. Geological Survey (USGS). In this section, the
global exports of coal, trend in global exports of the coal and percent share of key exporters
are analyzed. The global coal demand rose in 2017 by 1% after two years of decline, the main
change in global energy demand trends last year. The decrease in earlier years was led by
lower demand in the power sector in key markets such as China and the United States. The
rebounce in coal demand in 2017 was driven entirely by an increase in coal-fired electricity
generation, which drove up coal demand for power by nearly 3.5% as compared to the
previous year, while declining global coal use in industry and buildings offset half of the
growth in coal use in electricity generation. Asia accounted for the largest increase in coal
demand with China taking the lead9.
TABLE 6: WORLD'S TOP 10 COAL EXPORTERS- YEAR 2017 (VALUE: BILLION USD)
Ranks Exporter Coal Exports % age
1 Australia 40.6 36.6
2 Indonesia 17.9 16.1
3 Russia 13.5 12.2
4 United States 9.9 8.9
5 Colombia 6.8 6.2
6 South Africa 5.7 5.2
7 Canada 5.1 4.6
8 Netherlands 4.1 3.7
9 Mongolia 2.2 2
10 China 1.1 1
9 www.worldtopexports.com
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4.2. Quantum of Demand
The below table highlights the top five importers of coal in the world. As per below table,
Japan leads the world in Coal imports10.
TABLE 7: WORLD'S TOP IMPORTERS OF COAL (VALUE:MILLIONS USD)
Importers 2013 2014 2015 2016 2017
Value Tons Value Tons Value Tons Value Tons Value Tons
World 128.4 1241.87 113.7 1244.8 90.78 1209.21 84.88 1208.2 133.24 1275.95
India 14.93 160.75 16.4 195.11 14.12 206.38 12.71 193.11 20.09 197.74
Japan 23.61 191.64 19.75 188.5 16.34 190.73 15.24 189.81 22.92 192.88
China 25.93 266.73 18.9 226.69 10.14 155.8 11.51 183.33 18.6 188.13
Korea 12.95 126.57 12 131.02 9.86 135.14 9.23 134.52 15.08 148.26
Currently, Pakistan is at 22nd in list of top world importers of coal. Last year, Pakistan
approximately imported 1 million metric tons. Huge supply of coal is available at miners’
end. Miners need market where they can sell their coal. Improvement in quality can increase
the demand of Pakistani coal in export markets of India, Japan and South Korea.
5. CLUSTER GAP ANALYSIS IN THE LIGHT OF INTERNATIONAL BEST PRACTICES
Mining of coal is not just extraction; rather it is a complete set of activities from estimation of
reserves to marketing of the end product. In this section, analysis of gaps between the cluster
underlying practices and best practices in domestic and international market in mining. For
analyzing gaps both the domestic market and international markets are assessed separately.
Efforts are made to assess the best practices in those countries that are newly emerged and
Pakistan can get into their position with available resources.
The coal cluster of Lakhra lags far behind the international coal mining practices in terms of
infrastructure, technology, human resources, safety and environment, and financial condition
of the SMEs.
5.1. Reserves Maping and Estimation
In sample countries, advanced techniques are preferred to estimate and mapping mineral
reserves. Surveying and geological mapping of identified mineral areas are done by using
light detection and ranging (LIDAR) and unmanned aerial vehicle (UAV) technology
clusters. Mapping and estimation of resources through advanced technologies help in better
planning and utilization of the natural resources.
In Pakistan, there is no such a system to estimate and map resources. Lack of using advanced
methods to estimate resources affects the authentication of available reserves in Lakhra.
10 www.trademap.org
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Furthermore, licenses, and mine leases are allotted on the basis of a basic geological survey
having no scientific grounds. Use of modern scientific methods and techniques such as
LIDAR, UAV and geo modeling are non- existent in Lakhra Cluster.
5.2. Infrastructure
In developed countries, the basic road network, electricity, gas, water and communication are
the responsibility of state and are provided before allotment of leases. In China and USA, the
mine access roads are developed by private sector, however, the amount incurred on such
roads is deducted from the royalty until cost is recovered.
In China, electricity, water and communication are inbuilt in the lease agreement such that
leases will be allotted if these facilities are provided by the state. The concept of developing
Industrial Zones/Estates including facilities of processing, polishing, packaging, machinery
manufacturers, machinery repairing workshops near mining hubs is also becoming a
successful model.
FIGURE 7: COAL MINING INFRASTRUCTURE IN CHINA11
11 Source: Miningglobal.com
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FIGURE 8: OPEN PIT MINING IN THAR, SINDH
Unfortunately, in Lakhra like other mining areas in Pakistan, the infrastructure is either non-
existent or is in very poor state. The development of mine access roads, availability of
electricity and water is done by investors from their own sources. There is no such policy or
incentivized mechanism at the provincial level for development of access roads, availability
of electricity and water. Only one or two cellular networks are available at Lakhra mining
area. Arrangement of these facilities not only involve huge capital investment, but also
constrain the investors to buy modern technology for mine operations.
5.3. Technology
In the sample countries, improved and efficient technology is used in mining practices.
Whereas, in countries like China, USA and Brazil, the technology has transformed from
haulage to conveyor belt . The utilization of conveyor belt has increased the mine production
as compared to haulage and has reduced the quarry waste.
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FIGURE 9: INSIDE COAL MINES IN DEVELOPED COUNTRIES
FIGURE 10: REMOT CONTROLLED MINING IN ADVANCED COUTNRIES
.
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FIGURE 11: MACHINENRY IN DEVELOPED COUNTRIES
FIGURE 12: TRANSPORTATION OF COAL
There is no any kind of advance method being used for mining quarries in Lakhra. However,
Mining activities in Lakhra are still carried through outdated techinques of mining.
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FIGURE 13: DRIFT MINE ENTERANCE IN LAKHRA
FIGURE 14: SHAFT MINING IN LAKHRA12
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FIGURE 15: MANUAL COAL HANDLING IN LAKHRA
FIGURE 16: MANUAL COAL DRILLING
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FIGURE 17: COAL TRANSPORTATION (LANDHI)13
FIGURE 18: TRANSPORTATION- 30 TONS PER TRUCK
13 Source: Fahim Siddiqui- Dawn.com
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5.4. Human Resource
In the sample countries like China, USA and Brazil, the mining of coal is carried out by high
trained and qualified workers. There are technical experts for different works in the
mining,i.e machinery operation, drilling, fatching, undercuting, surface treatment is done by
different workers with proper training and experience in that specific task. In these countries,
there are state of the art public and private sector technical training institutes providing
training in various processing specialties. In most of the sample countries, there are dedicated
training institutes and centers in the processing hubs that provide training and apprenticeship
only in the processing sub sector.
Coal mining is mostly performed by unskilled, untrained and inexperienced workers. There is
not no technical institute or center in public and private sector that provides training in
mining. The existing technical and vocational training centers do not offer any such training.
FIGURE 19: MANUAL HANDLING OF COAL
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FIGURE 20: LABOR AT LAKHRA
FIGURE 21: COAL LOADING
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FIGURE 22: DRINKING WATER
The level of current workforce in Lakhra can be analyzed from the fact that only few
qualified quarry masters are available in the entire cluster and same is the case across
Pakistan. Mining activities are carried by non-qualified and ill trained individuals that does
not only limit the production capacity, rather also results in over 50% of quarry wastages.
5.5. Access to Finance
In the countries with well developed mineral development sectors, multiple banking products
are available for financing the mining activities particularly technology. In these countries
mine itself is used as collateral to avail bank finance. Secondly, there are dedicated
warehouses where the mine product is stored, is also accepted as collateral for bank loan.
Another important financing facility in these countries is debt financing. Other common
financing options available for mine owners are; assets based finance, royalty based finance
and income stream based finance.
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6. KEY ISSUES
6.1. Regulatory
The local mine owners association Lakhra claims that the prevailing mineral governance and
mine concession rules have created issues instead of facilitation. Under this new policy of
mineral of Sindh, the provincial government uses tactics to delay leases on time.
Furthermore, high taxes, withholding tax along with sales tax and custom duties result in the
increase of cost of production.
Following are the key issues related to regulatory regime:
Delay in issuing of license.
The selling price of the coal in Sindh is Rs. 3,500 to 4,500 whereas that of the Punjab
and Baluchistan is 6,000 to 7,580. In comparison to this the sales tax in Lakhra is Rs.
500.
Reported misconduct of the Government officials.
6.2. Infrastructure
Infrastructure of Lakhra coal field is in worst condition. Water, electricity, gas and access to
road are the basic necessities of life. Due to poor infrastructure the per sq.ft. cost of Lakhra
mining is Rs. 7,000 as compared to that of the Rs. 2,500/sq.ft. in Punjab.
There is no facility of drinking water and even though water for washing, bathing and
cooking is also not available. Mining companies arrange water through water tankers
for their laborers.
Due to unavailability of electricity, mining companies use diesel generator for mining
purpose. Distance from export market Hala Naka to coal field is about 75 kilometer.
At present, 60 kilometer road from tarde market to Habibullah stop is in good
condition, but about 15 kilometer road from Habbilbullah stop to coal filed is in worst
conditions. This 15 kilometer road causes accidents as loaded trucks pass through the
road. It is also very risky for labor and local community who use this road .
6.3. Technology
100% of mining in Lakhra is non-mechanized. The existing technology at mines is outdated
and inefficient.
The available literature and industry sources confirm that up to 50% of coal is lost
during extraction. Major reason behind this wastage is outdated machinery.
Similarly, export market requires coal with 0% of Sulphur, but coal at Lakhra
contains 8 percent.
Lack of value addition severely affects this sector. In Pakistan mostly found coal is
lignite type which is low quality coal among all typres of coal in the world.
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6.4. Financing
Bank loan facilities for mining cluster are not available in Pakistan. Some of the key issues
related to poor access to finance are;
There is no policy of banks to accept coal mines as collateral
Lack of finance for technology upgradation
6.5. Human Resource
Lack of skilled workforce is a major constraint for investors in this coal cluster. The
existing workforce including skilled and semi-skilled workers at mines do not have
any qualification in the relevant sector and have seldom undergone any such training.
There is lack of mining course taught at any vocational college in Pakistan. Technical
colleges in Pakistan do not offer any course regarding mining.
6.6. Marketing
The marketing issues in the cluster are defined below.
Due to the inferior quality, the price of Lakhra coal is only Rs. 4,500/ton in
comparison to the Rs. 12,000/ton for Baluchistan coal. Therefore ,the major customer
is the Brick Kilns.
High transportation cost increases the selling price
Mixing of dust with coal impacts the quality of production negatively.
6.7. Social
Lakhra was undeveloped area before discovery of coal reserves. After discovery, mostly
people migrated and settled there. There was no dispute over surface rent by land
owners/local communities in Lakhra. Local communities nowadays increase interference in
coal mining and ask for commission without any logical rationale. Inspite of paying royalty
amount, mine owners face hurdles in mine operations.
6.8. Environment
There are a few key issues related to environment. It makes surroundings’ temperature much
higher. Continuous usage of diesel generator, fans, loader, and summer sable contribute to
pollution. Furthermore, wastage is dumped in open environment, which contaminates the
atmosphere. Frequent movement of transportation vehicles aggravates the situation.
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7. PROPOSED INTERVENTIONS
7.1. Regulatory
Required Intervention 01:- Provincial Mineral Policy
Revision of mineral policy should be in close coordination with relevant stakeholders, Levy
of taxes should be commensurate to the value of the mineral.
Required Intervention 02:- Strengthening of Institutions
The quality of a country‘s institutions is critical for governing growth and development.
Strengthening institutions and organizations provides an opportunity to optimize the performance
of national development. Due to the parallel responsibility of Federal and Provincial
organizations for the affairs of the mining industry in Pakistan; the current institutional
framework is not providing a clear and transparent environment to investors. It is thus important
to identify and develop enabling institutions for a strong mineral sector in Pakistan.
All the key mineral policy elements will require institutional backing to ensure continuity and
accountability. The institutional reforms should ideally include the development of a new
Ministry of Mineral Development with three sub directorates/ inspectorates:-
Inspectorate of mine health and safety
Inspectorate of land and mineral rights
Sustainable development directorate, providing guidance on:-
Economics and infrastructure
Social benefits
Environmental protection.
Required Intervention 03:- Duties and Taxation
Establishment of weighbridges to control the misconduct of Government officials, mostly
conducted by regulatory and executory institutes. Policy should be made to facilitate this
sector as it has great potential to contribute in the economy.
7.2. Infrastructure
Roads and Electricity should be provided for smooth operations for mining and trading of
coal. Development of metalled roads in 60-Kilometer radius around mines areas of Lakhra.
Installation of electricity lines, and permanent supply of water for the mining areas of Lakhra
Required Interventions
60 Km Mine Access Roads Development
Electricity and other utilities
Responsibilty
Energy Department, Government of Sindh
Required Budget for Intervention
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Estimated budget of Rs. 06 billion will be required for the purpose
7.3. Technology
The Sindh government should facilitate the mine owners for mining and coal processing.
Required Interventions
Machinery pools for mine owners
Coal washing plants in mining areas
Responsibilty
Energy Department, Government of Sindh
Required Budget for Intervention
Total budget of Rs. 1.5 billion will be required for the purpose.
7.4. Finance
Loans should be provided on soft terms. State Bank of Pakistan has also initiated policy for
coal sector, miners may get benefits from this scheme.
7.5. Human Resource
Internship / apprenticeship programs are necessary in coal mining sector, because it gives
practical knowledge to students,it should also be made part of the curriculum/course for mine
engineers, geologists, technical and vocational training centers where applicable. Each
student obtaining a degree/certificate/diploma in the field of mineral sector must complete
apprenticeship of at least 6 months with a mine facility. There should also be some incentives
in the form of stipend to build interests of students.
Special courses for coal mining should be initiated to facilitate industry for skilled labor
force. Government Poly Technical institutes should be proposed for this area.
Labor is already trained from day to day operations. Technical knowledge and their education
should be provided for better operational results.
7.6. Marketing
Market development and marketing are major elements of promoting any sort of commodity.
For market development and focused marketing, there is a need of special and focused study
and marketing strategy. It is found that Pakistan should make sophisticated market strategy to
enhance the coal marketing.
After a thorough review of the previous chapters on the world market, it has been found that
major usage of coal is in the construction and power generation industry. Raw products have
the biggest market in Europe and Asia .
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Following measures are being proposed as entry points in the target market.
7.6.1. Tapping Buying Houses, Agents, Trade Councils and Associations
Importers/buying houses, agents, key trade councils and associations should be identified in
collaboration with local trade bodies and associations. This will not only help in creating new
market avenues for Pakistani products, rather will also help in ease of exports.
7.6.2. Trade Exhibitions
Trade exhibitions are very much necessary because they provide awareness of market and
advanced technologies that are internationally used in coal sector. Furthermore, these
activities open avenues for marketing. Trade Development Authority of Pakistan (TDAP)
should play its vital role to facilitate potential exporters to participate in international coal
exhibitions. Similarly, national exhibitions should be arranged at least once a year and that
should als publicized internationally.
7.7. Social and Environmental
Required Interventions
Establishment of Dispenseries for Mine workers
Schools for children of labor
R.O. Plant for cleaning of river water for labor and communities
Responsibilty
Energy Department/ Education Department/ Health Department, Government of Sindh
Cost of the Intervention
The estimated cost of the intervention is Rs. 300 million.
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8. Economical, Social, and Environmental Impacts
8.1. Economic Impacts
The support of government and progressive role of private sector will increase the overall
productivity and profitability of the coal cluster of Lakhra, Jamshoro by following ways:
Increase in production from existing mines
Increased number of mines
Increased revenue, decreased operating costs, and hence higher profits for the existing
as well as new mines
Establishment of access roads at mine sites will reduce the transportation cost for
them, and hence better profit margins.
Inflow of investment by marketing and awareness efforts in the cluster.
Reduction in the wastage of production.
Improvement of living standard and economic welfare of indigenous people.
Strengthening and expansion of aligned and service industry like logistics and brick
kilns.
Increase in number of SMEs.
8.2. Environmental Impacts
The above mentioned interventions will have the following impacts on the environment.
Restricting mining activities to certain areas.
Mine access roads reducing production wastage, will obstruct the spread of dangerous
gases.
Green products as per the international standards and trends
Mitigation of contamination of water
Trend of using products to safeguard against climate changes
8.3. Social Impacts
Direct employment for about 5 to 6 thousand people:
Better socio-economic conditions of local people, and the labor
Social uplift due to the establishment of schools and hospitalssss in the area
Bringing the local communities into mainstream of industrialization
Improved safety and hygiene of the mining and industrial employees and local
communities
Increased job opportunities
Reduction in number of mine and road accidents