ISLAMABAD: The Islamabad High Court (IHC) is set to examine accusations of irregularities in the procurement of coal for power plants, which have reportedly escalated the costs associated with electricity generation.
A group of petitioners has approached the court, raising concerns about the bidding process used for coal procurement. They have urged the court to compel the Ministry of Energy to conclude its inquiry, initiated following a letter from the power divisions on March 1.
The petitioners have also requested directives for the National Electric Power Regulatory Authority (Nepra) to establish clear and transparent guidelines for the procurement of coal by power producers.
During arguments before Justice Miangul Hassan Aurangzeb, counsel for the petitioners, Dr. Farogh Naseem, highlighted that Nepra approves electricity tariffs and transfers the burden of Fuel Cost Components (FCC) — the expenses for fuel used in electricity production — to consumers.
Dr. Naseem emphasized that the procurement process for coal, conducted through bidding, is intended to be equitable and transparent, but currently lacks regulation.
According to the petitioners, between July and December 2022, the preferred supplier allegedly provided coal to power plants at a rate 85% higher than market prices, owing to the absence of clear guidelines. In contrast, introduction of spot purchase guidelines in January 2023 led to competitive bidding, resulting in suppliers offering discounts ranging from 11% to 15%.
Faced with reduced profit margins, the favored supplier reportedly sidestepped regulation by entering into a custom long-term contract for coal supply.
The petitioners have urged the court to nullify the long-term supply agreement and instructed Nepra to formulate comprehensive regulations and guidelines for coal procurement.
The case underscores ongoing efforts to address transparency and efficiency in the energy sector, crucial for ensuring fair practices and minimizing costs associated with electricity generation.
