ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has advised the prime minister to establish a dedicated coal authority to deal with all issues about coal imports, including tendering, product specifications and related matters.

This was disclosed by Nepra chairman Tauseef H. Farooqui while presiding over a public hearing on guidelines for coal import as some stakeholders including independent power producers (IPPs) and coal suppliers conveyed their reservations over the bidding process particularly the procurement of coal from Afghanistan and the spot market and demanded a transparent mechanism.

The hearing was attended by a large number of representatives of various stakeholders including the Ministry of Energy, Central Power Purchasing Agency (CPPA), Private Power Infrastructure Board (PPIB), Thar Coal Energy Board, IPPs, coal importers and suppliers etc.

Mr Farooqui said unlike other fuels, coal supplies were outside the normal regulatory mechanism and with its increasing share in the energy supply required professional handling by relevant experts, adding he had advised the prime minister to set up a coal authority.

Stakeholders demand a transparent import mechanism

The regulator noted the concerns and suggestions from stakeholders of the stakeholders and will accordingly revise the guidelines at the earliest so that purchase from the above sources by the coal-fired power plants commences at the earliest and generation of cheaper electricity is ensured.

During the public hearing different measures were suggested to facilitate coal imports from Afghanistan and spot purchases as well.

The hearing was told that CPPA had set a condition of Rs100 million paid-up capital for the coal suppliers which acted as an entry barrier and should be reduced to Rs50m to open entry for more coal suppliers to participate in bidding for coal import.

The regulator indicated that the suggestion would allow better competition. It was reported that only two companies had participated in one of the bidding round when the condition of Rs100m paid-up capital was enforced but about 35 companies participated in bidding for coal was set at Rs50m.

Some of the suppliers even suggested that there should be no condition of paid-up capital when suppliers were to submit performance guarantees. However, it was informed that the idea behind the paid-up capital condition was to invite companies with a strong financial position in bids.

In existing guidelines, bidders are required to submit a bond along with the bid for coal imports. It was suggested that successful bidders should submit a performance guarantee which should be replaced with a bid bond. Nepra agreed to this proposal as well.

Some stakeholders also demanded that coal suppliers should have at least two years of experience to participate in the bids. However, some interveners opposed this condition, saying that it would block the entry of new coal supplier companies and strengthen the monopoly of a few existing players.

It was counter-argued that the rationale behind experience was to ensure that inexperienced suppliers do not create operational challenges in the market.

At present, there were no set criteria for coal trading as imports had been limited to the cementsector until recently.

Published in Dawn, December 6th, 2022