WORLD BANK AGREES TO HELP PAKISTAN DEVELOP THAR COAL

UNCLAS ISLAMABAD 003108


SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EAID EFIN ENGY PK
SUBJECT: WORLD BANK AGREES TO HELP PAKISTAN DEVELOP THAR COAL


1. (SBU) Summary. The World Bank has agreed to assist Pakistan with
development of the estimated 175 billion ton Thar Coal field in
Sindh Province. The World Bank plans to work with the newly formed
Thar Coal and Energy Board which will be led by the Sindh Chief
Minister but will include federal government representatives. End
Summary.


2. (SBU) Aslam Sanjrani, Managing Director, Thar Coal and Energy
Board (TCEB) formally requested World Bank assistance from Yusupha
Crookes, Country Director for Pakistan, at the World Bank office on
August 29. On September 18, Rashid Aziz, Senior Energy Specialist at
the World Bank's Islamabad office confirmed with Econ that the World
Bank will support Pakistan's request to develop the Thar Coal field
in Sindh Province. Aziz noted that the World Bank plan will be
driven by three primary considerations: (1) enabling the Sindh
government to promote the Thar coal deposits to potential investors
through the recently developed Thar Coal and Energy Board (TCEB);
(2) assisting the Sindh government in the overall development of the
mining sector; and (3) strengthening the institutional capacity of
the concerned provincial government ministries, departments and
entities/agencies. Aziz said that the World Bank will form a task
force to interact with the provincial government and TCEB for the
development of a program and technical assistance projects.


3. (SBU) Aziz said that the technical assistance requirements are
initially expected to be for: (1) strengthening the capacity of the
concerned government ministries including, to the extent required,
at the federal level as well as departments and specific agencies
such as TCEB; (2) advisory services for establishing and
strengthening the TCEB; and (3) for technical, financial and legal
advisors to carry out the required reviews, studies and analyses.
Asked if the World Bank would be willing to fund the required
feasibility studies for the development of Thar coal, Aziz said that
"if the technical assistance project determined it to be one of the
milestones in developing domestic coal, then the World Bank would be
willing to arrange significant financing for it."


4. (U) To move forward with development of the Thar coal fields, the
Sindh government established the Thar Coal and Energy Board (TCEB)
on July 26 with the Sindh Chief Minister as the lead. The Board will
consist of the Federal Minister for Water and Power as
Vice-Chairman, the Minister for Law and Justice, the Deputy Chairman
of the Planning Commission, two Provincial Ministers nominated by
the Chief Minister, the Secretary of the Ministry of Water and
Power, Sindh Chief Secretary and one eminent person nominated by the
Government of Sindh, while the Managing Director will act as its
Member/Secretary.


5. (U) With its headquarters in Karachi, the function of the TCEB is
to act as a one-stop shop on behalf of all Ministries, Departments
and agencies of the Government of Pakistan and Government of Sindh
in matters relating to development and leasing/sub-leasing of the
field. Under Pakistan's 1973 Constitution mineral rights fall within
the provincial jurisdiction, however the federal government is
charged with generating power. Since the discovery of Thar coal in
1992, disputes between the provincial and the federal government
over the development of the field have delayed all progress on
extraction of the 175 billion tons of lignite coal.


6. (SBU) Comment. Developing Thar coal is now seen as the key to
ensuring sustainable energy supplies for the country and Thar is
often referred to as Pakistan's "low hanging fruit" in the energy
sector. Given the poor quality of the lignite coal, any development
will be expensive and will require more money than the Government of
Pakistan currently has available for its development; yet faced with
a mounting energy shortfall of over 4500 mega watts per day,
Pakistan is desperate to explore alternative energy sources. World
Bank assistance will be needed to bridge the divide between federal
and provincial authorities and to provide much needed capacity
building for local authorities who lack an expertise in coal
development. End Comment.

PATTERSON