ISLAMABAD: Port Qasim Electric Power Company (PQEPC) has opposed a proposed one-year limit on coal supply agreements, warning that the restriction could undermine fuel security, complicate procurement and increase operational risks for coal-fired power plants.
In comments submitted to the Central Power Purchasing Agency-Guarantee (CPPA-G), the company also challenged proposed benchmarks for coal procurement discounts, arguing that differences in supplier offers do not, by themselves, establish irregularities.
PQEPC urged the government and CPPA-G to assess its procurement practices against its approved tariff determination, generation licence, power purchase agreement (PPA) and implementation agreement. The company operates a 1,320-megawatt coal-fired power complex comprising two 660MW units.
The company argued that the proposed mechanism for setting ceiling prices for replacement coal suppliers, based on the highest discounts offered in comparable tenders, was not expressly stipulated in the applicable legislation or its project agreements. It maintained that regulatory guidelines should not override existing contractual obligations unless incorporated through the legally prescribed process.
According to PQEPC, coal tenders cannot be compared solely on headline discounts because they differ in quantities, contract duration, payment currency, delivery arrangements, quality specifications and performance guarantees.
The company rejected the use of discounts ranging from $0.20 to $7.12 per metric tonne, cited by the Power Division, as the basis for adverse findings. It said the higher discount related to a contract that remained unimplemented and was backed by a performance guarantee of approximately Rs5 million, which it considered inadequate relative to the commercial exposure involved.
PQEPC also raised concerns about imported Indonesian coal, arguing that historical discounts against the ICI-3 benchmark could not be treated as a permanent entitlement amid changing coal specifications, quality requirements and market conditions.
It cited an increase in the minimum net as-received calorific value requirement from 4,000 to 4,200, alongside supply constraints following reductions in Indonesian coal export quotas during 2026. According to the company, seaborne coal exports from Indonesia declined 23.34 per cent year-on-year in August 2026.
The company maintained that higher prices or reduced discounts for coal meeting revised quality requirements should not automatically be treated as evidence of non-compliance. It also defended the use of alternative suppliers at less favourable prices, saying backup arrangements were necessary to protect fuel availability and minimise exposure to contractual penalties.
Opposing the proposed one-year limit, PQEPC argued that international coal miners and vessel owners generally require longer-term arrangements, particularly where minimum offtake commitments are absent. It further claimed that CPPA-G’s alleged failure to fulfil its minimum annual energy payment obligation under the PPA had affected the availability of such commitments.
The company warned that mandatory annual retendering could create procurement gaps, particularly if new tenders had to be initiated before existing processes were completed and the necessary board, shareholder and regulatory approvals obtained.
PQEPC said the existing framework already allowed monthly scrutiny of fuel costs through the fuel price adjustment mechanism under its tariff determination, enabling the National Electric Power Regulatory Authority (NEPRA) to review procurement costs without imposing a rigid annual contract limit.
On supplier defaults, the company supported holding defaulting suppliers accountable but called for any cost-allocation mechanism to require an established breach and provide affected parties an opportunity to be heard. It also sought exemptions for force majeure events and other circumstances beyond the control of suppliers or power producers.
PQEPC said it assumed fuel supply risks under its contractual arrangements, earned no return on the fuel-cost component and recovered only actual, verifiable procurement costs through its tariff. It cited a pass-through loss of approximately $0.58 per tonne in its most recent fuel price adjustment and losses of around Rs1.62 billion associated with spot coal procurement guidelines.
The company argued that procurement outcomes should not be deemed irregular simply because they differ from industry averages based on transactions with dissimilar commercial terms.
PQEPC has asked the government and CPPA-G to reconsider the proposed annual contract cap, assess procurement against applicable project documents and introduce due-process safeguards for supplier-default cost allocations.
It also referred to NEPRA’s June 22, 2026, recommendations on imported coal procurement and proposed designating a public-sector agency or enterprise to centrally procure and supply coal to power plants, potentially streamlining procurement and improving fuel supply coordination.
The proposals remain part of the ongoing debate over coal procurement rules, fuel security and regulatory oversight of power generation costs.
Story by Mushtaq Ghumman
