Indepe­ndent power producers found overcharging users through costly coal procurement

ISLAMABAD: Indepe­ndent power producers (IPPs) operating on impor­ted coal have been found imposing an additional burden on electricity consumers through opaque and inefficient coal procurement practices, with the cost ultimately passed on through monthly fuel price adjustments (FPAs). While consumer groups have been raising concerns over such practices at various forums, including public hearings, the power division and the National Electric Power Regulatory Authority (Nepra) have now also pointed to inefficiencies in coal procurement and their financial impact on consumers. The issue gained prominence after recent competitive bidding for coal supply to the 660MW state-owned Jamshoro Power Plant attracted a discount of $7. 12 per tonne from a Karachi-based supplier compared to discounts of only 20 to 50 cents per tonne in some contracts involving IPPs. “The power division has identified significant inefficiencies in the procurement of imported coal by power plants, ” an official statement said on Tuesday, adding that fresh policy guidelines had been iss­ued “for corrective action that could save the natio­nal exchequer up to Rs380 million annually”. In a recent order, Nepra had already pointed out concerns over coal procurement by Port Qasim Electric Power Company (PQEPC) under a six-year contract involving discounts of $0. 20 to $0. 50 per tonne based on estimated coal prices. “This type of evaluation has never been observed in any bidding by any other power plant, including PQEPC, and does not seem justified, as it is based on estimated coal prices, which may change in future, ” Nepra said in its judgement. The regulator also noted that the Port Qasim plant had published its tender notice only in China instead of reaching out to a broader pool of potential bidders. “Had discounts been incorporated into the bid evaluation as a major criterion, it may have yielded more competitive and higher discounts from prospective bidders, ” Nepra said. The regulator also observed that the plant had not disclosed that it had already executed a long-term coal supply agreement when the matter was discussed with the regulator on two occasions, prompting “proceedings regarding misstatement and/or non-disclosure of information”. Nepra subsequently directed the Port Qasim plant to conduct fresh bidding for a long-term coal supply agreement within three months of its March 2026 FPA decision. However, officials said that after the March 25 order, the company procured about 1. 2 million tonnes of coal, enough for almost an entire year, just before a new tender. They said the contract again involved a discount of around $0. 50 per tonne against the $7. 12 discount secured by the public-sector Jamshoro plant. The difference alone works out to around $8 million, officials said. If similar procurement practices were followed by other IPPs, the impact could rise substantially. The power division said the procurement inefficiencies were identified during a series of meetings presided over by the power minister, where officials reviewed actual data, contractual arrangements and market practices. “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. These include three major 1, 320MW plants at Port Qasim, Hub Power and Sahiwal, as well as the Lucky and Jamshoro plants which also have the capability to use imported coal, ” it said. The division said coal import prices for IPPs were linked to internationally recognised benchmarks such as the API-4 index, but the final price paid by a plant also depended on the discount negotiated with the supplier. PQEPC Chief Financial Officer Adil Ashraf and Procurement Chief Liang Ding Ping did not respond to Dawn’s written queries. Published in Dawn, August 26th, 2026

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