ISLAMABAD: The federal government is likely to establish a Coal Regulatory Authority (CRA) to ensure transparency in pricing of imported coal and other regulatory issues of imported-coal power plants, well-informed sources in the National Electric Power Regulatory Authority (Nepra) told Business Recorder.
The proposal has also been endorsed by Minister for Defence Khawaja Asif, who is overseeing some investigations into coal procurement process.
Nepra has received a number of complaints against imported coal procurement process of one of the coal power plants, established by a Chinese company at Sahiwal.
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Muhammad Ali, former caretaker Minister for Power and Petroleum and SAPM on Power in PDM-II Government, had also written a letter on the issue of coal procurement process of Sahiwal coal power plant and ordered for an inquiry into it. On September 6, 2024, Waseem Anwar Bhindar, Registrar Nepra, in a letter to the defence minister had stated that to underscore that the pricing of coal falls outside the mandate of the Nepra.
The Regulator has consistently communicated to the federal government the urgent need for the establishment of a CRA to oversee and regulate coal pricing, ensuring adherence to international best practices for enhanced transparency.
“Regrettably, this initiative has yet to materialise, and since coal is part of the electricity tariff, Nepra has no choice but to provide a pricing mechanism for coal until such an authority is established (or an alternative better arrangement is put in place by the federal government),” Bhinder added.
According to the Nepra, the coal pricing mechanism for long-term coal supply agreements is outlined in the Authority’s decision of September 23, 2016. The said decision was issued following a due process of public hearing and stakeholders comments.
The Nepra is of the view that this mechanism computes coal prices based on international indices, which serve as a benchmark for determining the price of coal imported by IPPs, and the prices exceeding the benchmark are not allowed. The CPPA-G has issued NOCs to IPPs for their long-term coal supply agreements under the terms of their Power Purchase Agreements (PPAs).
M/s Huaneng Shandong Ruyi Company (Private) Limited (HSR), Port Qasim Electric Power Company (Private) Limited (PQEPCL) and China Power Hub Generation Company (Private) Limited (CPHGCL) have each established 2x660 MW coal-fired power plants at Sahiwal, Punjab, Port Qasim, Karachi and Hub Balochistan, respectively. These power plants have been operational for five to seven years, and have primarily sourced coal from South Africa and Indonesia under long-term supply agreements.
The Registrar Nepra has further stated that the Authority has initiated proceedings to review the current mechanism, with a key focus on ensuring greater transparency and fairness in the procurement process, including but not limited to, introducing the option of competitive bidding for long-term coal supply agreements. A decision in this matter is anticipated to be issued in a few months.
According to the Nepra, various stakeholders, predominantly coal suppliers, have written to it regarding the coal procurement processes of IPPs, primarily related to spot coal purchases, adding that fact finding committee has been constituted to examine the complaints.
The sources said, since Defence Minister Khawaja Asif has conveyed his nod on the proposal of CRA, the case will be submitted to the Federal Cabinet for final approval by the concerned ministry.
Copyright Business Recorder, 2024