Coal occupies an unusual position in Pakistan’s energy sector. The country possesses one of the world’s largest lignite deposits, yet imported coal still supports several major power stations and industrial users. Development of the Thar coalfield has reduced part of this dependence and created a domestic fuel source for electricity generation, but it has not resolved the wider financial and infrastructure problems affecting the power system.
Pakistan is therefore operating two coal industries at the same time. One is built around imported fuel delivered to large power plants and cement factories. The other is based on lignite mined in the Thar Desert and consumed mainly by nearby power stations. The long-term direction is toward greater use of local coal, although transmission constraints, mine capacity, environmental pressures and falling grid demand will determine how far that shift can proceed.
Thar Changed Pakistan’s Coal Geography
Pakistan has coal deposits in Sindh, Balochistan, Punjab and Khyber Pakhtunkhwa, but the Thar coalfield dominates the national resource base. Located in southeastern Sindh, Thar contains an estimated 175.5 billion tonnes of lignite within a much larger national coal resource of approximately 186 billion tonnes.
For many years, this resource remained commercially undeveloped. The coal is located beneath desert terrain, and large-scale extraction required new mines, roads, water systems, transmission lines and purpose-built power stations. Development accelerated through cooperation between the federal government, the Sindh government, Pakistani companies and Chinese investors associated with the China-Pakistan Economic Corridor.
Commercial generation from Thar began in 2019 with the 660 MW Engro Thar Coal Power Project at Block II. Additional projects followed, including the 330 MW Thar Energy plant, the 330 MW ThalNova facility and the 1,320 MW Shanghai Electric project at Block I. Pakistan also classifies the 660 MW Lucky Electric plant at Port Qasim as capable of using Thar coal, although fuel transport and supply arrangements have complicated its conversion from imported coal.
Together, these projects turned Thar from a largely geological resource into an operating mining and electricity centre. Coal extraction, generation and supporting infrastructure are now concentrated within an integrated mine-to-power system in which nearby plants consume lignite without requiring long-distance imports through seaports.
Imported Coal Remains Part of the Power System
Thar development has not removed imported coal from Pakistan’s electricity sector. Three large power stations completed during the first phase of CPEC remain designed primarily around imported fuel: the 1,320 MW Sahiwal plant in Punjab, the 1,320 MW Port Qasim project near Karachi and the 1,320 MW China Power Hub Generation plant in Balochistan.
These facilities added 3,960 MW of imported-coal capacity between 2017 and 2019. They helped reduce power shortages at a time when Pakistan urgently needed additional generation, but their fuel requirements exposed the sector to international coal prices, freight costs, exchange-rate movements and pressure on foreign-currency reserves.
Location also affects their economics. Port Qasim and Hub are positioned near the coast, allowing coal to move directly from imported cargoes to power stations. Sahiwal is inland and requires coal to travel by rail from Karachi, adding another stage to the supply chain.
The government has examined whether imported-coal plants can blend or convert to Thar lignite. Technical studies have proposed starting with limited blending, including tests using approximately 10% Thar coal. The three main imported-coal plants have a combined capacity of 3,960 MW, so even partial conversion could reduce fuel imports.
Conversion is not simple. Thar lignite has different moisture, heating and combustion characteristics from the imported coal for which these plants were designed. Large volumes would also have to move from southeastern Sindh to plants in other regions. Rail capacity, coal handling systems, storage facilities and boiler modifications would all influence the cost.
Coal Production Is Increasing, but Utilization Is Uneven
Coal consumption in Pakistan reached approximately 16.2 million tonnes during July to March of the 2024–25 fiscal year. The power sector accounted for about 69.7% of this total, consuming nearly 11.3 million tonnes. Brick kilns used approximately 2.3 million tonnes, while cement manufacturers and other industries consumed about 2.6 million tonnes.
These figures show that electricity has become the central market for Pakistani coal. Outside Thar, smaller coalfields continue to supply lower-volume users, particularly brick kilns. Cement plants and other industrial facilities use a combination of domestic and imported coal depending on quality, location and price.
However, installed coal capacity does not automatically translate into high annual generation. Pakistan’s power plants operate within a system affected by weak electricity demand, expensive tariffs, transmission limitations and contractual capacity payments. Some generating units remain available even when the system operator does not need their full output.
NEPRA has reported that local-coal plants have been underused because of operational problems, transmission constraints and variations in demand. The Lucky Electric plant recorded a utilization factor of only 37.8% in the 2023–24 fiscal year, partly because a dependable Thar coal supply had not been established and imported fuel weakened its position in the dispatch order.
This means the main restriction on Pakistan’s coal strategy is no longer simply the availability of generating capacity. The country must coordinate mine expansion, transportation, transmission and electricity demand if it wants to use its existing assets more effectively.
Transmission Limits the Value of Southern Generation
A large share of Pakistan’s newer generation is located in Sindh and Balochistan, while major demand centres are farther north in Punjab. This geographical imbalance affects Thar coal, nuclear power, wind generation and coastal thermal plants.
The transmission network cannot always transfer the full output of southern power stations to northern consumers. Network congestion may force the system operator to reduce generation from relatively low-cost plants and use more expensive facilities closer to demand centres.
The Matiari–Lahore high-voltage direct-current line strengthened north–south transmission capacity, but additional bottlenecks remain elsewhere in the network. NEPRA has identified overloaded or inadequate lines that restrict dispatch from several southern plants.
For Thar coal, this creates a contradiction. Pakistan has invested in domestic mines and mine-mouth generation to reduce imported fuel costs, yet the electricity system may be unable to absorb the available output. Expanding a mine without addressing grid constraints could increase fuel availability without producing an equivalent increase in useful generation.
Transmission planning therefore has almost as much influence over the future of Thar coal as mining policy. The commercial value of additional lignite production depends on whether power can move reliably from the desert to urban and industrial markets.
Foreign Exchange Drives the Domestic-Coal Strategy
The economic argument for Thar coal is based heavily on energy security and foreign-exchange savings. Pakistan regularly faces pressure from imported oil, LNG and coal costs. Currency depreciation can raise the local price of these fuels even when international commodity prices are stable.
Domestic lignite reduces direct exposure to overseas coal purchases and shipping charges. It also creates a local operating base involving mines, power stations, engineering services, transportation and supporting infrastructure.
This does not make Thar electricity independent of external costs. The original projects relied on foreign financing, imported equipment and long-term power-purchase agreements. Capacity charges remain payable under contractual arrangements, even when plants operate below their potential. Mining equipment, spare parts and technical services may also require foreign currency.
The relevant comparison is therefore broader than the price of one tonne of local coal against one tonne of imported coal. Pakistan must consider mine development costs, financing, transmission investment, plant utilization and contractual payments. Domestic fuel can improve energy security, but only when the full system uses it efficiently.
Coal Expansion Faces a Narrower Path
Pakistan is not preparing for unrestricted coal growth. Its generation planning increasingly favours hydropower, nuclear energy, solar and wind, while government policy has ruled out additional power plants using imported fossil fuels within the main expansion plan.
Some coal projects remain under consideration, including further Thar development and proposals to convert existing plants to local fuel. The emphasis has shifted from building a large new imported-coal fleet to improving the use of existing plants and increasing the domestic share of their fuel.
Environmental considerations will also shape development. Thar lignite is extracted through large surface mines in an arid region where water management, land acquisition, resettlement and community infrastructure require long-term attention. Coal combustion also creates carbon dioxide, air pollutants and ash that must be controlled through plant technology and regulation.
Rapid growth in distributed solar presents another challenge. Businesses and households are installing rooftop systems to reduce their exposure to grid tariffs. As more consumers produce electricity independently, demand from conventional power stations can weaken during daylight hours. Coal plants designed for steady operation may then run less frequently while still receiving capacity payments.
Pakistan’s Coal Outlook
Coal will remain part of Pakistan’s energy system because the country already has mines, generating plants, industrial demand and an exceptionally large domestic resource. Thar has moved the sector away from complete dependence on imported supplies and established lignite as a significant national fuel.
The next phase will be less about proving that Thar coal can be mined and more about integrating it into a financially sustainable power system. Reliable mine output, improved rail links, stronger transmission, realistic electricity demand and better plant utilization will be more important than the theoretical size of the resource.
Pakistan’s coal industry is therefore likely to develop selectively. Domestic lignite may replace part of the imported coal used by existing plants, but large-scale expansion will compete with renewable generation, hydropower and nuclear investment. The final role of coal will depend on whether local fuel can deliver affordable electricity without adding further strain to the country’s power-sector finances.
