ISLAMABAD: A fact-finding committee of the National Electric Power Regulatory Authority (Nepra) has found serious faults with the coal procurement process for power production at Sahiwal and recommended a series of corrective measures, including the creation of an independent regulator to protect electricity consumers from unjustified burden.

The four-member committee was constituted last year after Muhammad Ali, a former energy minister and now Special Assistant to the Prime Minister, called for an investigation and the government received complaints from coal suppliers regarding an agreement between the management of Sahiwal Power Plant and Awan Trading Company.

Some aggrieved consumers had even taken the matter to the Islamabad High Court, which directed Nepra to examine the complaints from bidders.

The bidders had alleged collusion, inflated pricing, restrictive bidding and procedural irregularities.

Bidders accused authorities of collusion, inflated pricing and restrictive bidding

The probe committee, however, did not fix responsibility for coal procurement nor did it accuse the management of Sahiwal Coal Power Project of wrongdoing.

“The bidding process could have been more competitive as currently, it invo­lved only a single qualified bidder, which limits competition,” noted a 16-page report prepared by the committee.

“Greater participation from multiple eligible and qualified bidders could have strengthened the process, ensuring more competition,” the report added.

The committee provided an opportunity to the Sahiwal project’s management and Awan Trading to defend the allegations but expressed displeasure that bidders “did not provide any evidence” to Nepra despite repeated reminders.

No guidelines

The committee conceded that “Nepra has not yet established guidelines for long-term coal procurement and acknowledges that the decision to formalise such guidelines is a policy matter within Nepra’s purview. Therefore, the committee suggested, the regulator should consider issuing these guidelines in future.

Another allegation was that the coal procurer deliberately manipulated bidding documents to exclude the requirement for 60-day notice, as required by the bid document.

In its reply, the management said the “reliability of coal suppliers was very low” while it had to meet the power production targets given by the purchaser.

The probe team found that this may have contributed to restricting the competition, but at the same time observed that it was up to the procurer to set conditions.

For one cargo, the bidders alleged, the coal supplier had prior knowledge of winning the bid as it delivered within a few days after the contract for a consignment that had come from South Africa weeks in advance with purchase orders in the name of Sahiwal procurer.

Both Sahiwal and Awan (supplier) said the said arrangement was not binding and the cargo had originated in the name of three procurers, including the Sahiwal project.

The probe committee noted that the timeline between the contract execution and arrival of the first coal shipment prima facie appears to be constrained and called for greater procedural transparency and competitive bidding framework in future.

Price difference

Another allegation pertained to supply of coal to Sahiwal plant at Rs75,000 per tonne, although it was available in the market at Rs40,000. However, the probe team said the supportive market report did not specify the basis for these rates or their availability timeframe. “Given these limitations, no further analysis is carried out by the committee.”

Given a series of deficiencies in the bidding process, the fact-finding committee suggested the government “prioritise the creation of an independent authority to regulate coal pricing, procurement and sectoral transparency”.

It also called upon Nepra to issue guidelines for long-term coal procurement, emphasising competitive bidding and inclusive eligibility criteria.

It said enhanced transparency should be ensured and all future tenders “must explicitly justify deviations from standard practices, for example advance notice waivers, to pre-empt perceptions of bias”.

It said that since the state-owned Central Power Purchasing Agency was the purchaser for all power plants and signatory to all contracts, its role was pivotal to determination of prices.

Published in Dawn, February 11th, 2025