Policy guidelines issued: PD detects huge variation in imported coal purchases

ISLAMABAD: The Power Division has identified significant inefficiencies in imported coal procurement by power plants and issued policy guidelines for corrective action that could save the national exchequer around Rs380 million annually. The findings emerged during a series of high-level meetings chaired by Federal Minister for Power Sardar Awais Ahmed Khan Leghari, where officials reviewed actual procurement data, contractual arrangements and prevailing market practices. Pakistan has a fleet of coal-fired power plants with a combined capacity of around 5, 280 MW that rely wholly or partly on imported coal. These include the 1, 320 MW plants at Port Qasim, Hub Power and Sahiwal, besides Lucky and Jamshoro power plants, which also have the capability to use imported coal. READ ALSO: Procurement and pricing: Nepra revises framework for imported coal The plants procure coal under Coal Supply Agreements with international suppliers, with prices generally linked to internationally recognised benchmarks such as the API-4 index. However, the final price paid by power plants also depends on the discount negotiated with suppliers. The review found significant variations in discounts offered to different power plants despite purchases being made from the same suppliers and against the same international benchmark. According to the findings, discounts ranged from as low as USD 0. 25 per metric ton to USD 7. 12 per metric ton. In some cases, the same supplier offered substantially different discounts to different power plants. The review also found instances where backup supply arrangements were negotiated at lower discounts than the main supply agreements. In other cases, plants continued receiving coal from a supplier offering a lower discount even though another contracted supplier was offering a higher discount. The Power Division noted that such discrepancies directly affect electricity consumers because fuel procurement costs are ultimately reflected in electricity tariffs. As an immediate corrective measure, the Power Division is issuing policy guidelines to the National Electric Power Regulatory Authority (Nepra) aimed at improving transparency, consistency and competition in imported coal procurement. As the first phase of the reform, the government is introducing the principle of “best available discount” for coal procurement. Under the proposed mechanism, power plants will be required to procure coal from their contracted suppliers offering the highest discount against the applicable international benchmark. Plants would not be permitted to purchase coal from a contracted supplier offering a lower discount when another supplier is offering a higher discount, according to the policy guidelines. The Power Division estimates that implementation of the measure could result in annual savings of approximately Rs380 million, without requiring any additional investment. Minister Awais Leghari said the intervention reflected the Power Division’s broader approach of identifying inefficiencies through data and market analysis and addressing them through policy and regulatory measures. He said the objective was to ensure that savings arising from more efficient fuel procurement ultimately benefited electricity consumers. The minister emphasised that the initiative was not aimed at interfering in commercial operations but at ensuring that fuel procurement was carried out efficiently and transparently where the resulting costs were ultimately passed on to consumers. The coal procurement review forms part of a broader effort by the Power Division to identify and eliminate avoidable costs in the power sector and safeguard the interests of electricity consumers. The government, according to the Power Division, intends to continue reviewing different elements of the power sector to identify inefficiencies and ensure that public-sector entities operate in the public interest. When contacted for comments on the guidelines issued by the Power Division to Nepra, a representative of coal power plant questioned why does not the government purchase coal through bidding. Copyright Business Recorder, 2026

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