Power Division targets Rs380m coal savings

The Power Division has identified weaknesses in the procurement mechanism for imported coal

The Power Division has identified weaknesses in the procurement mechanism for imported coal and introduced new corrective guidelines aimed at reducing costs for the power sector.

According to the Power Division, new guidelines have been issued to the National Electric Power Regulatory Authority (Nepra) regarding the purchase of imported coal. The reforms are expected to generate annual savings of around Rs380 million at the pre-procurement stage.

Several meetings on coal procurement were held under the chairmanship of Energy Minister Awais Leghari. During the meetings, officials reviewed actual procurement data, existing contracts and prevailing market practices.

The Power Division said the government has begun a reform process in the imported coal procurement sector. The measures will cover both the import and transportation of coal.

Under the proposed system, authorities have decided to introduce the principle of obtaining the best available discount when purchasing coal.

Coal-fired power plants will not be allowed to purchase coal from a global supplier offering a lower discount when a better discount is available from the same market. Officials found that different power plants had previously received significantly different discounts from the same coal supplier.

According to the data reviewed by the Power Division, discounts offered to different power plants ranged from 25 cents to $7.12 per tonne.

The review also found that some backup supply agreements secured higher discounts than the corresponding main supply contracts.

The Power Division said some coal-fired power plants continued purchasing coal from suppliers despite the availability of higher discounts elsewhere. As a result, additional procurement costs were ultimately passed on to electricity consumers.

Energy Minister Awais Leghari said the Power Division was using procurement data and market analysis to identify weaknesses in the existing system.

He said the government was addressing these shortcomings through regulatory and policy measures designed to improve efficiency and transparency.

Leghari stressed that the purpose of the reforms was not to interfere in commercial transactions. Instead, the government wants to ensure that fuel procurement for electricity generation is carried out efficiently and transparently.

He said fuel costs are ultimately recovered from electricity consumers, making it essential to eliminate unnecessary expenses from the procurement process.

The minister added that any savings generated through the reforms would be passed directly on to electricity consumers.