Power Division Flags Coal Procurement Gaps To Unlock Rs. 380 Million Savings

In a major step to reduce the cost of electricity for consumers, the Power Division has identified significant inefficiencies in the procurement of imported coal by power plants and has issued policy guidelines for corrective action that could save the national exchequer up to Rs.

Key points

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• Pakistan has a significant fleet of coal-fired power plants with a combined capacity of approximately 5, 280 megawatts that rely wholly or partly on imported coal.
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• This coal procurement review is part of a continuing series of corrective measures undertaken by the Power Division to safeguard the interests of the individuals of Pakistan.
• To keep these plants running, they must enter into Coal Supply Agreements with international suppliers.

Meanwhile, the revelation came throughout during a series of high-level meetings chaired by Federal Minister for Power Sardar Awais Ahmed Khan Leghari, where office-holders reviewed actual data, contractual arrangements and market practices rather than relying on reports or external inquiries.

As well as the Lucky and Jamshoro plants which additionally can apply imported coal, these include three major 1, 320 MW plants at Port Qasim, Hub Power and Sahiwal. To keep these plants running, they must enter into Coal Supply Agreements with international suppliers.

In practice, the cost of imported coal is generally linked to internationally recognized benchmarks such as the API-4 index. It reflects the market rate of coal traded in global markets. Nevertheless, the rate that a power plant ultimately pays depends not only on this benchmark but additionally on the discount it is able to negotiate with the supplier.

Meanwhile, the analysis made public a significant discrepancy. Different power plants were purchasing coal from the same suppliers, using the same international pricing benchmark, yet receiving materially different discounts ranging from USD 0.25 to USD 7.12 per metric ton.

For context, the review additionally identified that the same supplier had offered substantially different discounts to different power plants. In some cases, backup supply arrangements were negotiated at lower discounts than the main supply agreements. Sapphire Fibres Enters GEPCO Privatization Race After Seeking FESCO Stake.

There were additionally instances where coal was being received from a supplier offering a lower discount even though another supplier offering a higher discount remained under contract.

This discrepancy matters since the cost of fuel is ultimately passed on to electricity consumers through the tariff. Any avoidable difference in fuel procurement cost directly increases the burden on households and businesses throughout Pakistan.

As an immediate measure, the Power Division has moved decisively to strengthen the regulatory framework. Policy guidelines are being formally issued to the National Electric Power Regulatory Authority (NEPRA) to enforce greater transparency, consistency and competition in coal procurement.

As a first phase of reform, the Power Division is introducing a simple but significant principle of "best available discount" in coal procurement. Power plants will be required to purchase coal from their contracted suppliers offering the highest discount against the applicable international benchmark and will not be permitted to purchase from a supplier offering a lower discount.

Based on this reform, an estimated saving of approximately Rs. 380 million annually is projected. This saving will be achieved without any extra investment, but simply by ensuring that power plants purchase coal at the best available discount.

Minister Awais Ahmed Khan Leghari emphasized that this intervention reflects the broader approach of the Power Division: identify inefficiencies through data and market analysis, address them through appropriate regulatory and policy measures, and ensure that the resulting savings translate into tangible benefits for electricity consumers. P@SHA Chairman Faces Revolt Ahead of Elections.

He observed that this is not concerning interfering in commercial operations but regarding ensuring that where fuel costs are ultimately passed through to consumers, procurement is conducted efficiently and transparently.

This coal procurement review is part of a continuing series of corrective measures undertaken by the Power Division to safeguard the interests of the individuals of Pakistan. The administration remains committed to examining every element of the power sector, eliminating unnecessary costs, and ensuring that public organizations serve the public interest. Stay Connected with ProPakistani.

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Taken together, the developments around power Division Flags Coal Procurement Gaps To Unlock Rs. 380 Million Savings point to a situation that is still moving, and the coming days should bring more clarity.