IHC to look into ‘irregularities’ in coal purchase by power plants

ISLAMABAD: The Islamabad High Court (IHC) will look into alleged irregularities in the purchase of coal for power plants, which increased the cost of electricity generation.

A group of petitioners filed an application with the court, raising questions over the bidding process for procurement of the coal. They urged the court to order the Ministry of Energy to conclude its inquiry initiated after the power divisions wrote a letter on March 1.

The applicants have also sought directions for the National Electric Power Regulatory Authority (Nepra) to issue effective and transparent guidelines for the procurement of coal to be used by power producers.

While arguing before a single-judge bench comprising Justice Miangul Hassan Aurangzeb, the petitioners’ counsel, Dr Farogh Naseem, stated that Nepra approves the tariff for the generated electricity and passes on the burden of Fuel Cost Components (FCC) — the cost of fuel used to produce electricity — to users.

In order to procure coal from the market, a power plant carries out a bidding process which is meant to be fair and transparent, the counsel argued, and said the procurement process is “totally unregulated”.

Between July and Dec 22, the supplier preferred by the power plant reportedly supplied coal at a rate 85 per cent higher than the market price as there are no guidelines. He added that spot purchase guidelines and regulations were introduced in Jan 23, and till December of that year, it resulted in competition between suppliers who offered an 11pc to 15pc discount to power plants.

The preferred supplier, who was losing out on big margins, decided to avoid regulation by getting into a tailor-made contract for a long-term supply of coal.

The petitioners asked the court to void the long-term supply contract and order Nepra to draft regulations and guidelines for procurement.

Published in Dawn, July 17th, 2024