ISLAMABAD: Independent power producers (IPPs) operating on imported coal have come under scrutiny over procurement practices that may be increasing electricity costs for consumers, with additional costs ultimately passed on through monthly fuel price adjustments (FPAs).
The concerns have been highlighted by both the Power Division and the National Electric Power Regulatory Authority (Nepra), following findings of significant inefficiencies and limited competition in the procurement of imported coal by power plants.
The issue gained prominence after a recent competitive tender for coal supplies to the 660MW state-owned Jamshoro Power Plant secured a discount of $7.12 per tonne from a Karachi-based supplier. This compared with discounts of only 20 to 50 cents per tonne secured in some contracts involving IPPs.
According to the Power Division, the identified procurement inefficiencies could result in corrective measures saving the national exchequer up to Rs380 million annually.
Nepra has previously raised concerns about the coal procurement practices of the Port Qasim Electric Power Company (PQEPC) under a six-year supply contract, where discounts ranged between $0.20 and $0.50 per tonne.
The regulator questioned the method used to evaluate bids, particularly because discounts were assessed against estimated future coal prices. Nepra observed that such an approach could limit competition and was not justified because international coal prices could change significantly.
The regulator also noted that PQEPC had advertised its tender only in China rather than approaching a wider pool of potential suppliers. According to Nepra, incorporating discounts as a major criterion in bid evaluation could have resulted in more competitive offers.
The authority further observed that the company had not disclosed an existing long-term coal supply agreement during earlier discussions with the regulator, leading to proceedings over alleged misstatement and/or non-disclosure of information.
Nepra subsequently directed PQEPC to conduct fresh bidding for a long-term coal supply agreement within three months of its March 2026 FPA decision.
However, officials said the company procured around 1.2 million tonnes of coal shortly after the March 25 order—enough to meet nearly a year’s requirements—before a new tender was conducted.
They said the procurement again involved a discount of approximately $0.50 per tonne, compared with the $7.12 per tonne discount obtained by the Jamshoro plant.
Officials estimated that the difference in discounts alone represented a financial gap of around $8 million. They warned that the impact on consumers could be substantially higher if similar procurement practices were being followed by other IPPs.
The Power Division said the issue was identified during a series of meetings chaired by the federal power minister, where officials reviewed actual procurement data, contractual arrangements and prevailing market practices.
Pakistan has a significant fleet of coal-fired power plants with a combined capacity of approximately 5,280MW that relies wholly or partly on imported coal. These include the 1,320MW Port Qasim, Hub Power and Sahiwal plants, along with the Lucky and Jamshoro power plants, which also have the capability to use imported coal.
The Power Division said imported coal prices for IPPs are generally linked to international benchmarks such as the API-4 index, but the final price paid by each plant also depends on the discount negotiated with suppliers.
PQEPC Chief Financial Officer Adil Ashraf and Procurement Chief Liang Ding Ping did not respond to written queries seeking their comments.
The findings have renewed concerns over transparency and competitiveness in fuel procurement, with regulators and government officials now focusing on whether more effective bidding mechanisms could reduce generation costs and ultimately provide relief to electricity consumers.
Story by Khaleeq Kiani
