Govt tightens imported coal procurement to save Rs380m annually

According to Mettis Global, the government has tightened rules for coal-fired plants buying imported coal. Plants must now buy only from whichever contracted supplier gives the largest discount to the international benchmark, and they may not draw coal from lower-discount vendors while a contract offering a bigger discount is still in force. The first phase of the reform is estimated to save electricity consumers Rs380m a year without any extra investment.

The step follows an examination of plant buying records, contracts and market practices across a fleet of approximately 5,280MW that uses imported coal either fully or in part. Three major 1,320MW units at Hub Power (HUBC), Port Qasim and Sahiwal are part of that group, while Lucky and Jamshoro can also burn imported fuel. The review found that discounts on coal from the same suppliers against the same benchmark ranged from about $0.20 to $7.12 per metric tonne.

Two further provisions are under consideration for the Coal Procurement Guidelines. One would cap long-term supply agreements at a one-year tenure so that IPPs can test the market, while the other would keep the cost gap caused by a supplier default off consumer tariffs and place it on the defaulting supplier or the IPP. The Power Division wants both applied immediately once adopted, and the review is framed as one step in an ongoing effort to lower power costs.