TCEB Managing Director Ajaz Ali Khan has protested to the Cabinet Division Secretary for issuing a "controversial" notification at a time when the province is urging investors to come and develop the project. "This notification contradicts the draft approved by the TCEB in its board meeting on Aug 22, 2009, which was thereafter forwarded to the Cabinet Division by the Sindh government for endorsement," the sources quoted the TECB Managing Director as saying. He said the notification issued by the Cabinet Division did not meet the requirements of the TCEB.
"It also takes away the image of the TCEB as a one-stop organisation, a point that has been emphasised by the President and the Prime Minister time and again," he added.
The sources said the TCEB sent a draft keeping in view the functions of the TCEB for a fast-track development of Thar coal resources. The TCEB is represented by both the Federal and provincial governments. The status of members of the board, including the Sindh Chief Minister, Federal Minister for Water and Power, Finance Minister, Deputy Chairman of Planning Commission and the Federal Law Minister, is such that the decisions, taken by this high forum, need to be complied with by all the ministries/departments so as to ensure timely action on proposals for Thar coal development.
On Nov 26, 2009, the board members thoroughly discussed the draft prior to sending it to the Cabinet Division. The notification, issued by the Cabinet Division, reflects that this high forum can only request the ancillary agencies or department for any decision to be complied with.
"This message is negating the whole purpose of creation of the TCEB and is in conflict with the desires of the President and Prime Minister," the sources added.
The provincial government believes that the controversial notification will send negative signals to the prospective investors. The TCEB is of the view that the Federal government must re-issue the notification as per the draft approved by the TCEB.
According to official documents, the TCEB in a meeting held a few weeks ago declared Thar as Special Economic Zone (SEZ) with a special package of incentives, and advised that necessary comparative statistics should also be collected from neighbouring countries where mining was promoted recently.
Finance Minister Shaukat Tarin, who also attended the meeting, opined that Thar coal was of strategic importance for Pakistan. He emphasised that not only the SEZ, but also Thar should also carry the status of strategic interest area.
According to the Finance Minister, the recommendations of Board of Investment (BoI) consultants such as Arthur Ben, who recently carried out a regional comparative analysis on special economic zones, should also be considered and be made part of this incentive package to be offered for the foreign direct investment (FDI) in Thar.
On internal rate of return (IRR), a detailed debate took place and the Finance Minister opined that the government should propose 18 percent IRR for investment on Thar coal. Tarin also said that a certain portion of profits might also be set aside for distribution to specific union councils by the investors in the shape of cash grants in order to better create ownership amongst local populace apart from the CSR contribution. He advised that all the stakeholders should sit together and formulate concrete proposals for the ECC to announce Thar as Special Economic Zone and zone of strategic interest.
The Vice Chairman of National Electric Power Regulatory Authority (Nepra) explained that the regulator also supported exploitation of indigenous resources, however, coal pricing would be the real deciding factor for determining indicative tariff for Thar coal.
The TCEB Managing Director clarified that the coal pricing was a provincial subject; however, the Sindh government was working on coal pricing aspect with international consultants of TCAP.
The TCEB chief also highlighted the experience of China's Shenhua Group due to lack of appropriate tariff.
The Minister Finance opined that the government should set a forum to arrange consultative meetings between the Nepra and investors to decide indicative tariff beforehand.