China Machinery Engineering Corporation (CMEC) has announced its decision to halt operations in the Thar coal mines effective September 10, 2023, due to an “overdue receivable” of $50 million.
The “overdue receivable” issue has been escalating, with the amount accumulating to $50 million by the end of July. This predicament has become the most urgent concern for both CMEC and the Sindh Engro Coal Mining Company (SECMC), as stated in a letter from CMEC to SECMC.
The letter further elucidated that the contract for the Thar Coal Mine Project has only four months remaining, with approximately $30 million in offshore and onshore milestone payments slated for the upcoming months.
In an effort to continue coal production at a rate of 25,000 tonnes per day until September 10th, despite facing equipment shortages and other challenges, CMEC consulted with its on-site personnel. However, this arrangement is contingent on SECMC securing payment approval from the relevant bank or government during this period; otherwise, significant output reductions or even a complete halt may ensue, warned CMEC.
CMEC reported that between April and July of this year, only $22 million was transferred by SECMC. Furthermore, since June, SECMC’s monthly transfer of offshore delinquent receivables has markedly diminished.
The CMEC disclosed that it had previously informed SECMC through a letter that “overdue receivables” aged more than one year and six months would incur 20% and 10% terrible debts or provision depreciation treatment at CMEC headquarters.
Additionally, CMEC outlined the precarious financial situation of the CMEC Thar Coal Mine Project, citing massive outstanding debts, acute funding shortages, and substantial sums owed to subcontractors for service fees, components, and accessory expenditures.
This development raises concerns about the future of the Thar coal mining operations and underscores the pressing need for a resolution between the two parties.