Nepra to devise mechanism for purchase of coal

ISLAMABAD-National Electric Power Regulatory Authority (NEPRA) will deliberate on mechanism for the purchase of spot coal from Afghanistan/other sources for longer period of 3 to 6 months instead of current monthly basis.

In a public hearing scheduled for today (Monday), NEPRA will deliberate on the guidelines for coal fired power plants for procurement of spot coal from Afghan/other sources. According the NEPRA revised guidelines for procurement of coal on spot basis from Afghanistan/other source, the regulator has noted that coal power plants shall ensure that coal procurements from Afghanistan are conducted fairly and transparently, while the procurement process should be efficient and economical and must strive to ensure value for money for the consumers. Some of the guidelines are: imported coal based IPPs shall first ensure whether local coal such as Thar coal is available which can be used keeping in view plants’ technical requirement; IPPs shall estimate total quantity/quality of coal to be procured in the next six months; if no local coal is available which meets the desired specs, then IPPs shall progress with spot purchases as per this mechanism; bidder should meet minimum eligibility criteria which shall among other include submission of bid bond which shall be worked out as—Quoted Price x Quoted Quantity x 5 percent; paid up capital of the bidder shall be at least Rs100 million and shall be considered for minimum eligibility criteria. 

Moreover, bids shall be called by all IPPs during the same period; IPPs shall ensure that final bid/negotiated price is competitive; market reflective and comparable with that of other power plants and the difference between coal price procured for the same month shall not exceed 3 percent; the currency for importing and trading the Afghan coal shall be the Pak Rupees. 

The delivered cost of Afghan coal should remain lower than imported coal from any other origin. In case price of coal from Afghanistan in reflected in Rs/kWh is more than South African coal of same coal type (after necessary discounts if applicable) then the price of South African coal shall be used for allowing fuel price component. It should, however, be ensured that procuring higher quality coal justifies its purchase in terms of lower fuel tariff in Rs/kWh. Minimum order quantity of 2 train loads: i.e. 5kt +1-10 percent. In case of ash percentage 12 percent, there should be nonlinear penalty imposed on the coal. All rejection limits and penalties should be adjusted as per single delivery basis i.e. per train load instead of complete weighted average to ensure allowance of lesser deviation in quality to the supplier. The selection and award process shall prioritise the lower quoted price irrespective of the volume committed hence enabling a pool of suppliers to complete the requested quantity on a per month basis. Since PPRA rules do not apply to IPPs, they may further negotiate prices from the lowest offered bidder. The awarded contract should provide for revision in the price in case the duty structure of coal either in Afghanistan or in Pakistan changes during the term of the contract. The volumes not affected by the revised duty structure shall be liable for price revision. The final award price should indicate the market of Afghan coal in the comparable vicinity of the designated delivery place; the buyer should ensure that the award price is negotiated to reflect the actual value of the commodity. 

The process should have provision to accommodate additional supply at lower than awarded rates from new suppliers during the course of existing contracts if the price of commodity falls due to reduction in demand or any other event.  The regulator has invited comments from the stakeholders on the guidelines for coal fired power plants for procurement of locally available spot coal from Afghan/other sources. The authority would also like to deliberate on the mechanism for purchase of locally available spot coal for longer period of 3-6 months instead of current monthly basis.

Article source: https://www.nation.com.pk/05-Dec-2022/nepra-to-devise-mechanism-for-purchase-of-coal