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RR RUEHLH RUEHPW
DE RUEHKP #0342/01 3071207
ZNR UUUUU ZZH
R 031207Z NOV 09
FM AMCONSUL KARACHI
TO RUEHC/SECSTATE WASHDC 1371
INFO RUEHIL/AMEMBASSY ISLAMABAD 0828
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RUEHLO/AMEMBASSY LONDON 0355
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RUEHPW/AMCONSUL PESHAWAR 4643
RUEAIIA/CIA WASHDC
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RUEKJCS/SECDEF WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RHMFISS/JOINT STAFF WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 KARACHI 000342 
 
 
SENSITIVE 
SIPDIS 
 
E.O 12956: N/A 
TAGS: EMIN ENRG ECON PK
 
SUBJECT: BALOCHISTAN - MEETING WITH COAL MINE OWNERS 
 
¶1. (SBU) Summary: In an October 16 meeting in Quetta, mine owners 
said coal mines are the province's largest employer, with 100-250 
thousand employees.  Owners described the difficulty in finding 
markets for their ore, attracting investment, and operating in areas 
of lawlessness where violence and targeted killings (including of 
mine owners) have pushed coal production down by 75 percent over the 
past three years.  End summary. 
 
Importing Labor 
--------------- 
 
¶2. (U) Pol and Econ Offs met October 16 in Quetta with seven 
different coal mine owners to discuss Balochistan's coal mining 
industry.  The owners said coal is by far the largest product mined 
in Balochistan, with between 500,000 and 1.8 million tons extracted 
annually.  Owners described Balochistan's mines as "improvised," 
low-tech operations, requiring significant human labor to mine, 
package, and transport the ore.  The owners estimate that between 
100,000 and 250,000 workers are employed in mining or support 
industries in Balochistan.  Two thirds of the workforce is seasonal, 
migrating from the Swat region following the harvest there and 
creating a "mining season."  In season, sufficient labor is 
available until workers return north to begin planting the next 
year's crops in the spring.  "We pay our workers 500-800 rupees 
($6-$9.50) per day, which is very high, but the work is tough and 
dangerous so finding labor is always hard," they said. 
 
¶3. (U) Owners described finding markets for the high-sulfur ore as 
their largest challenge.  Balochistan's coal is shipped primarily to 
the Northwest Frontier Province and Punjab for use in brick-making. 
Its high sulfur content (between 3 to 8 percent) makes it less 
desirable for power generation and thus extremely difficult to 
market abroad.  While prices fluctuate significantly, owners said 
their coal sells for between $30-$45 a ton, compared to $45-$60 for 
low-sulfur coal.  The construction of a washing plant, estimated to 
cost USD $250,000 - $400,000, could sufficiently reduce sulfur 
levels, making Balochistan's ore more marketable; however, a 
"chronic lack of foreign and domestic investment" makes this option 
unlikely.  Owners opined that the construction of a thermal power 
plant could also create a significant market, but again, a lack of 
investment and political interest has thus far prevented such a 
development. 
 
Lawlessness Brings Down Productivity 
------------------------------------ 
 
¶4. (SBU) Owners said that lawlessness has reduced coal production by 
75 percent over the past three years.  Targeted killings and 
organized crime have exacerbated labor shortages, led to the closing 
of several mines, and cut off access to several viable mine sites. 
"We all have to pay gangs/mafia in order to operate, but still there 
is violence... and three mine owners have been among those killed." 
 
¶5. (U) Owners said the Government's Inspectorate of Mines is 
well-run, with mine inspections every few months, high safety 
standards, and active enforcement of mining regulations such as a 
requirement to have one mine manager for every three mines.  Despite 
these "high safety standards," mine owners estimate that 30 miners 
are killed each year, with 18 workers killed in a single explosion 
this past July. 
 
Sector Needs Investment 
----------------------- 
 
¶6. (U) Owners described their efforts as "improvisational," with no 
foreign or domestic investment, a lack of modern technology, and 
continual uncertainty in the market.  "We don't have the expertise 
to maintain our equipment, so when something breaks we scavenge the 
junkyards for parts."  The limited market for Balochistan's coal 
leads to dramatic swings in demand, particularly when the 
brick-making industry stops production during rains and the monsoon 
season.  "Coal is like a vegetable," one owner explained, "it only 
lasts about three months once it's out of the ground, so if you 
overproduce and can't find a buyer you lose significant amounts of 
money."  The owners returned to their earlier theme that 
construction of a thermal power plant, or washing plant to open up 
wider markets, could help stabilize demand and increase mine profits 
 
KARACHI 00000342  002 OF 002 
 
 
and employment. 
 
Comment 
------- 
 
¶7.  (SBU)  The mine owners point to the law and order situation as 
the reason for the decline in the industry, but believe that with 
increased investment and an expanded market they will be able to 
revive operations.  However, there are larger problems confronting 
them.  Balochistan's long drought may pose difficulties in obtaining 
the water required for coal washing.  The building of coal power 
plants would create a larger domestic market for the coal, and work 
to resolve the country's power generation deficit.  However, until 
stability is returned to Balochistan, it is difficult for the 
province to attract investors.  End comment. 
 
FAKAN