NEPRA proposes setting up coal authority

New body will deal with coal imports for power production


Zafar Bhutta December 06, 2022

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) has asked Prime Minister Shehbaz Sharif to set up a coal authority to deal with coal imports for consumption in power plants.

“I have suggested to the prime minister that we should have a coal authority,” remarked Nepra Chairman Tauseef H Farooqi at a public hearing on Monday.

The power-sector regulator conducted the hearing to address concerns of independent power producers (IPPs) and coal suppliers over the approved guidelines for the purchase of Afghan and non-Afghan coal on a spot basis.

At the hearing, comments were sought from the stakeholders on how to optimise the spot purchase guidelines and create more competition.

A large number of representatives of different stakeholders including the Ministry of Energy, Central Power Purchasing Agency-Guarantee (CPPA-G), Private Power Infrastructure Board (PPIB), Thar Coal Energy Board, IPPs, coal experts, journalists, general public, coal importers and suppliers attended the hearing.

Nepra noted the concerns and suggestions of the stakeholders and would accordingly revise the guidelines so that coal purchase by the coal-fired power plants could commence at the earliest and generation of cheaper electricity was ensured.

Under the guidelines, a coal supplying company should have a paid-up capital of Rs100 million but it was suggested to reduce it to Rs50 million, which would pave the way for more suppliers to participate in the bidding for coal import. Nepra agreed to that proposal.

It was pointed out that only two companies participated in bidding when the condition of Rs100 million paid-up capital was applied.

Some suppliers suggested that there should be no paid-up capital requirement when they had submitted a performance guarantee. However, it was emphasised that the idea behind the paid-up capital condition was to invite companies with a strong financial position.

Currently, bidders are required to deposit a bid bond at the time of submitting bids for coal import. It was proposed that the successful bidders should submit the performance guarantee, instead of the bid bond. Nepra agreed to that proposal as well.

Some stakeholders floated the idea of introducing the minimum experience condition for coal suppliers. They suggested that the suppliers should have at least two-year experience of participating in coal import bidding.

However, some interveners expressed their opposition, arguing that it would block the entry of new coal supplying companies and strengthen the monopoly of some firms. Officials of Chinese companies stressed that the rationale behind the minimum experience condition was that the coal suppliers, having lack of experience, could create operational issues in the market. At present, there are no defined criteria for the coal traders.

Some stakeholders pointed out that the power sector was regulated, therefore minimum experience should be mandatory for the coal suppliers.

It was proposed that only pre-qualified companies should be allowed to bid for coal supply but some stakeholders turned down the proposal, saying that it would prevent some companies from participating in the bidding process.

Nepra chairman emphasised that the objective of the public hearing was to facilitate the coal suppliers and promote competition for cheaper coal supplies to the power plants.

He said that Pakistan wanted to import coal from Afghanistan in rupees and it did not want to place restrictions on imports.

The idea of putting a cap on coal prices was also discussed. The hearing was told that the offer of two different prices by the same company at a time should be discouraged.

It was noted that there should be only 3% price difference if the same company was submitting two bids, which would stop price manipulation.

The stakeholders argued that the coal suppliers were quoting different freight rates and prices were changing even on a daily and weekly basis. Therefore, the proposal would not be viable.

Published in The Express Tribune, December 6th, 2022.

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