Pakistan Targets Rs380 Million in Annual Savings from Imported-Coal Procurement

Review finds wide variation in coal discounts

Pakistan’s Power Division has identified gaps in the way coal-fired power plants procure imported fuel and has issued policy guidelines intended to reduce costs passed through to electricity consumers. The first phase of the changes is expected to save the national exchequer approximately Rs380 million annually without requiring additional investment, according to ProPakistani and Daily Pakistan.

The findings followed a series of meetings chaired by Federal Minister for Power Sardar Awais Ahmed Khan Leghari. Officials examined purchasing data, supplier contracts and prevailing market practices. The review focused on plants that depend wholly or partly on imported coal and therefore maintain Coal Supply Agreements with international suppliers.

Discounts ranged from $0.25 to $7.12 per tonne

Pakistan has approximately 5,280 MW of coal-fired generating capacity that can use imported coal, ProPakistani reported. The fleet includes the 1,320 MW plants at Port Qasim, Hub Power and Sahiwal, as well as the Lucky and Jamshoro facilities. Imported-coal prices are generally linked to recognized international benchmarks such as the API-4 index, but the final cost also depends on the discount negotiated by each plant.

The Power Division found that plants buying from the same suppliers against the same benchmark received substantially different discounts, ranging from $0.25 to $7.12 per metric tonne. The same supplier sometimes offered different terms to different plants. In other cases, backup supply agreements carried larger discounts than primary contracts. Officials also identified purchases from suppliers offering smaller discounts while alternative suppliers offering better terms remained under contract.

Highest contracted discount becomes the purchasing rule

The Power Division is formally issuing corrective guidelines to the National Electric Power Regulatory Authority, or NEPRA, to improve transparency, consistency and competition. Under the first-stage “best available discount” principle, a plant must buy from the contracted supplier offering the largest discount against the applicable international benchmark. It will not be permitted to select a contracted supplier offering a smaller discount.

The intervention does not renegotiate the international benchmark itself; it changes how plants choose among suppliers already available under contract. This distinction is important because fuel expenditure is recovered through electricity tariffs. Avoidable procurement costs therefore move directly into bills paid by Pakistani households and businesses.

Policy puts purchasing decisions under closer scrutiny

Leghari said the review was based on actual data and market analysis rather than external inquiries. He described the guidelines as a regulatory measure to ensure efficient and transparent procurement where fuel costs are passed on to consumers, rather than an attempt to interfere with normal commercial operations.

For generators and international coal suppliers, the rule makes the discount against the benchmark a more decisive factor in allocating contracted volumes. Suppliers with weaker terms could lose orders even when their agreements remain active, while plants will face tighter constraints on discretionary purchasing. The projected Rs380 million saving represents an initial step; the Power Division said reforms are also being pursued in coal imports and delivery, while it continues to examine other power-sector costs.