Inefficiency in coal buying unearthed

The Power Division has flagged significant weaknesses in how power plants procure imported coal, according to The Express Tribune. Policy guidelines issued for corrective action could yield savings of as much as Rs380 million a year for the state treasury. Officials examined real data, contract terms and market conduct in meetings led by Federal Minister for Power Awais Ahmed Khan Leghari, a Tuesday statement said.

Coal-fired plants totalling 5,280 megawatts rely wholly or partly on imported fuel, including three 1,320-megawatt facilities at Port Qasim, Hub and Sahiwal. Such plants need supply agreements with overseas sellers, and the price they pay is usually pegged to an international reference like the API-4 index. The final amount, however, also depends on the discount a plant manages to negotiate with its supplier.

As the opening phase of reform, the Power Division is adopting a principle it calls best available discount in coal buying. Under it, plants must buy from the contracted supplier offering the largest discount against the applicable benchmark, and purchases from a supplier offering a smaller discount will not be allowed. The measure aims to reduce electricity costs for consumers.