ISLAMABAD: The China Machinery Engineering Corporation (CMEC) has raised concerns about its ability to continue the smooth operation of coal production, citing difficulties in remitting necessary amounts for equipment imports.
This obstacle, if not promptly addressed, could lead to a disruption in daily coal output of 25,000 tons, potentially leading to a complete halt in production.
In a letter detailing their challenges, CMEC expressed the obstacles they are facing in transferring funds to their offshore account, which is crucial for the acquisition of essential equipment. The company had successfully remitted $22 million in overdue receivables to their offshore account between April and July, even amid Pakistan’s foreign exchange reserve shortages.
However, the situation has worsened since June, with a significant decrease in the monthly remittances of offshore overdue receivables from the Sindh Engro Coal Mining Company (SECMC), the partner in the Thar Coal Mine Project. June’s remittance was $3.7 million, significantly below the anticipated $10 million, and July saw only $3.4 million sent. The remittances hit zero in August, causing the “overdue receivable” to reach $50 million by the end of July.
Impact on Thar Coal Mine Project
The Thar Coal Mine Project, which has just four months remaining in its contract period, faces impending milestone payments of approximately $30 million both onshore and offshore. Finding a solution to reduce and clear these overdue receivables has become the utmost priority for both SECMC and CMEC.
The financial difficulties have severely impacted the CMEC Thar Coal Mine Project, leading to a scarcity of funds and accumulating expenses owed to subcontractors. The shortage of spare parts has resulted in equipment malfunction and extended shutdowns, disrupting the normal coal mining operations. The production challenges have placed additional stress on the project’s site team, who are faced with wage deductions and heightened pressure to resolve the financial crisis.
A provisional solution has been proposed, wherein CMEC will continue producing 25,000 tons of coal daily until September 10. However, this hinges on SECMC’s ability to secure payment approvals from relevant banks or government entities in accordance with the outlined payment schedule. Failure to do so could result in significant production cuts or even a complete halt in coal mining operations at the Thar Coal Mine.
