Inquiry Launched into Alleged Corruption in Coal Purchase Contract for Sahiwal Power Plant


ISLAMABAD: A probe has been initiated into allegations of corruption surrounding a coal procurement contract at the Sahiwal Power Plant, a critical project under the China-Pakistan Economic Corridor (CPEC).

Former Energy Minister Muhammad Ali raised concerns about the procurement process, prompting the inquiry. Ali’s inquiry, initiated just before he left office as caretaker minister, was prompted by stakeholders’ worries over transparency in the long-term coal purchase contract for the Sahiwal Power Plant.

The National Electric Power Regulatory Authority (Nepra) had previously cautioned against any lack of transparency in coal prices for Chinese-imported coal-fired power plants. In a letter dated March 1, 2024, Ali referred to stakeholder concerns regarding fairness and transparency in the bidding process, urging an urgent investigation covering various aspects such as past coal purchases’ adherence to prevailing rates and delays in Nepra issuing guidelines for long-term coal procurement in Pakistani rupees.

Additional areas of investigation include assessing efforts to ensure fair competition in supplier selection and suspending purchase contracts until a standardized procurement mechanism is established. The Power Division faces mounting pressure to address these concerns and uphold transparency in coal procurement for the benefit of consumers and the government.

According to stakeholders, the contract, which ideally should have undergone a bidding process, seemed to favor a specific party, as indicated by the Request for Proposal (RFP) process. The minister’s letter highlights the alleged preferential treatment of two suppliers in the financial year 2022-23, who were reportedly supplying coal at significantly higher prices than the market rate.

The Sahiwal Coal Power Plant, reliant on imported coal, has faced criticism not only for its procurement practices but also for the environmental and economic implications of coal transportation over long distances.

Following industry resistance, Nepra introduced spot bidding, notably reducing coal prices to the benefit of consumers but disadvantaging initially favored suppliers.

Despite these concerns, the economic burden of price discrepancies, resulting in additional monthly costs of multi-billion rupees, falls on electricity consumers due to the pass-through nature of fuel costs.

During a public hearing in August last year on FCA for July 2023, Nepra highlighted the significant financial strain on power consumers due to costly imported coal inventory held by coal-based power plants, particularly the Sahiwal Coal Power Plant.

Nepra raised concerns over lower base tariffs but higher claimed tariffs by coal-based power plants, particularly the Sahiwal plant, which submitted claims for Rs27.7 per unit despite Nepra’s reference tariff of Rs16.18 per unit.

The CPPA stated that despite coal purchased at $400 per ton being utilized for power generation at the Sahiwal Coal Power Plant, plummeting coal prices to $100 per ton still led to high generation costs. Moreover, the plant recorded zero output in April, and minimal outputs of 3 per cent in May and 8 per cent in June.

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