Power Division Identifies Flaws in Imported Coal Procurement, Eyes Rs380 Million Annual Savings
ISLAMABAD: The Power Division has identified shortcomings in the procurement mechanism for imported coal and issued new corrective guidelines to the National Electric Power Regulatory Authority (NEPRA).
According to the Power Division, the new guidelines are expected to generate annual savings of Rs380 million at the pre-procurement stage.
Several meetings were held under the chairmanship of Energy Minister Awais Leghari to review imported coal procurement. The meetings examined actual coal procurement data, contracts and prevailing market practices.
The government has initiated a reform process covering the procurement, import and transportation of imported coal.
The Power Division has decided to introduce the principle of obtaining the best available discount in coal procurement. Under the new mechanism, coal-fired power plants will not be allowed to purchase coal from a global supplier offering a lower discount when a better discount is available.
Previously, different power plants received varying discounts from the same coal supplier. Discounts on coal purchases ranged from 25 cents to $7.12 per tonne.
According to the Power Division, the same supplier offered different discounts to different power plants, while some backup supply agreements secured higher discounts than the main supply agreements.
Despite contractual arrangements, some coal-fired power plants did not purchase coal from suppliers offering higher discounts, resulting in additional costs that were ultimately passed on directly to electricity consumers.
Energy Minister Awais Leghari said the Power Division was identifying shortcomings through data and market analysis and addressing them through effective regulatory and policy measures.
He said the savings generated through the reforms would directly benefit electricity consumers.
Leghari clarified that the objective of intervention in coal procurement was not to interfere in commercial matters. Since fuel costs for electricity generation are ultimately recovered from consumers, he said, fuel procurement must be efficient and transparent.
“The Power Division’s objective is to eliminate unnecessary costs and provide genuine relief to electricity consumers,” the minister said.
