Costly’ coal purchase lands Power Div in a fix


ISLAMABAD: The Power Division is reportedly facing a “Catch-22” situation on a letter of former caretaker Federal Minister for Power and Petroleum, Muhammad Ali, who ordered a thorough probe into the purchase of coal by CPEC 1,320-MW Sahiwal Coal Power Plant on higher prices, which are being paid by the consumers, well-informed sources told Business Recorder.

Muhammad Ali wrote the letter, just three days before his departure from the office of caretaker minister, purportedly on complaints he received from the stakeholders.

“Some stakeholders approached the ex-caretaker power minister and apprised him that the contract of coal being purchased by Sahiwal power plant is a long-term one which should be on a bidding basis, and presently it is not transparent as RFP was tailored for one party.

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The ex-minister secretly probed the matters and found that there was some truthfulness that is why he ordered an inquiry to get to the bottom of the matter.

In March 2022, the National Electric Power Regulatory Authority (Nepra) also warned Chinese imported coal-fired power plants of implications if “legitimate” discount in coal prices is not passed onto the consumers.

The matter was referred by the highest office as serious complaints were received against Chinese imported coal-fired projects that they are siphoning money in the name of coal suppliers.

“These are very serious allegations. Please try to understand. I don’t want to caution you here but take my words very, very, very seriously. Show some very serious effort here; otherwise, I’m warning you for the last time that you will be in deep, deep, deep trouble,” warned the then Chairman Nepra Tauseef H Farooqi.

According to sources, the former caretaker minister, in his letter of March 1, 2024, wrote, reference is made to the complaints received from various stakeholders expressing serious concerns over the fairness and transparency in the bidding process of long-term coal contract in case of Sahiwal coal power.

There is an urgent need to investigate the matter and a comprehensive inquiry must be conducted covering the following aspects with report to be submitted within two weeks; (i) an audit or analysis should be conducted of coal purchases in the past and were these purchases in line with the prevailing rates. If not, what was the loss incurred which affected the consumers or the government; (ii) Why have guidelines for the procurement of coal on PKR purchase on a long-term basis not been issued by Nepra despite the fact that imported coal power plants have been in operation since a long time; (iii) how does Nepra or Power Purchaser, mandated under the relevant PPAs, ensure healthy competition while short-listing coal suppliers in the instant case; (iv) In the absence of specific guidelines from Nepra, were reasonable efforts taken to ensure that the process was transparent, fair and met the expectations of all stakeholders? Specifically, was adequate time provided to submit the bidding documents; (v) Were the terms solicited by Sahiwal Power reasonable and not specific to a supplier; (vi) despite all vendors offering payments in PKR, what criteria were used to select the impugned coal supplier in this case; (vii) given that the fuel price of coal is a pass-through item, has Nepra taken necessary steps to ensure that any potential savings arising from the agreements between the coal supplier and power producers were clawed back for the benefit of the electricity consumers, and (viii) until the inquiry is over, should all purchase contracts which are governed through an updated framework/ guideline, be halted till a standard and comprehensive mechanism is agreed upon with the stakeholders.

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