Rs380m inefficiencies identified in imported coal procurement by IPPs
The Power Division has identified significant inefficiencies in the procurement of imported coal by independent power producers (IPPs), estimating that corrective measures could save up to Rs380 million annually for electricity consumers.
Intelligence analysis by Llama
The Power Division has identified inefficiencies in the procurement of imported coal by IPPs, which could save Rs380 million annually for electricity consumers. The division has proposed reforms to the National Electric Power Regulatory Authority (NEPRA) guidelines governing coal procurement by coal-fired power plants.
Imagine you're buying coal for a power plant. The plant has a contract with a supplier to buy coal at a certain price. But sometimes, the supplier offers a better price to another plant. The Power Division wants to make sure the plant gets the best price possible, so they're changing the rules to make sure the plant buys coal from the supplier offering the best price.
Analysis
Inefficiencies in Imported Coal Procurement by IPPs
The Power Division has identified significant inefficiencies in the procurement of imported coal by independent power producers (IPPs), which could lead to substantial savings for electricity consumers. The division's analysis found discrepancies in discounts offered against the benchmark price, ranging from $0.20 to $7.12 per metric ton. In some cases, backup supply contracts were concluded at lower discounts than the principal contracts. There were also instances where plants received coal from suppliers offering lower discounts despite having contracts with suppliers offering higher discounts.
Corrective Measures
As part of immediate corrective measures, the Power Division has proposed improvements to the National Electric Power Regulatory Authority (NEPRA) guidelines governing coal procurement by coal-fired power plants. The division has introduced a simple but important principle of 'best available discount' in coal procurement. In a letter addressed to NEPRA's director registrar, Deputy Secretary (IPPs) Ehtisham Ul Haq referred to NEPRA's decision of June 22, 2026, and a subsequent notification issued on July 22, 2026, regarding 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.
Expected Savings
Based on this reform, an estimated saving of approximately Rs380 million annually is expected. The Power Division said NEPRA's requirement for coal-fired power plants to procure imported coal through competitive bidding would enhance transparency. The proposed measures include requiring power plants to procure coal from contracted suppliers offering the best available discount against the applicable international benchmark. Under the proposed mechanism, a power plant would not be permitted to purchase coal from a contracted supplier offering a lower discount when another contracted supplier is offering a higher discount for comparable coal.
Key points
- The Power Division has identified inefficiencies in the procurement of imported coal by IPPs.
- The division has proposed reforms to the National Electric Power Regulatory Authority (NEPRA) guidelines governing coal procurement by coal-fired power plants.
- The proposed reforms aim to ensure that power plants procure coal from contracted suppliers offering the best available discount against the applicable international benchmark.
- An estimated saving of approximately Rs380 million annually is expected based on the proposed reforms.
If the Power Division's proposed reforms are implemented, it could lead to significant savings for electricity consumers, making it a positive development for the power sector.
However, the implementation of the proposed reforms may face challenges, such as resistance from IPPs or delays in the regulatory process, which could hinder the expected savings.
