Sri Lanka is on the verge of losing power generation of 40 percent of total energy demand as the energy ministry is grappling to solve the current coal import issue which had arisen due to no bidders for recent coal tenders.
The supply of coal to the Lakvijaya power plant in Norochcholai has become a mission impossible for the energy ministry as not a single supplier had submitted bids to supply coal on credit basis for both term and spot tenders called by the Lanka Coal Company (LCC) recently.
This will result in further extended power cuts for long hours in the coming months if LCC fails to award the coal supply contract to a prospective supplier as soon as possible, energy ministry sources revealed.
The suppliers are demanding an upfront payment for the supply of coal and the government is not in position to make such payments due to the present dollar crisis.
Therefore, LCC is compelled to award the contract considering unsolicited proposals from suppliers, especially on Government-to-Government (G2G) basis.
The relevant advertisement calling for suppliers to submit expressions of interest/proposals to supply coal for the Norochcholai power plant was published by the LCC last week with the closing date stipulated as on or before December 1.
LCC has to import adequate stocks during the coal unloading season from October to April, as it can only be unloaded when the sea is calm during the period from October to April each year.
Normally, it imports stocks annually through four spot tenders (300,000 MT each) and a single term tender of 1.2 million MT via at least 35 shipments and it has to be a minimum of five shipments per month.
The process of coal procurement has now turned to a cumbersome affair for state authorities following the cancellation of the awarding of spot and term tender twice within less than two months this year, first over legal issues and then due to the failure of bidders to comply with guidelines.
The entry of two companies, Browns/CMEC’s and a Dubai based firm, Coral Energy, submitting bids for the second tender has brought down the coal pricing from USD 312 per MT quoted by the first tender winner Suek AG/Black Sand to the lowest level of USD 250-290.
If the cabinet approved procurement committee has allowed the tender to proceed to one of these companies without cancelling the tender, then Lanka Coal (Pvt) Ltd would have been able to save a staggering Rs.30 billion, a senior energy ministry official said.
Sri Lanka has only managed to secure 240,000 MT of coal, which will be sufficient till early January next year as the full payments have been made for four shipments, which have already been unloaded.
This will result in the shutdown of the Lakvijaya power plant after January next year due to no supply of coal compelling the Ceylon Electricity Board to continue the ongoing power cut keeping the people in the dark for long hours further, energy ministry sources divulged.
However, the cabinet of ministers at its meeting has approved the cancellation of the second spot and term tender for the procurement of coal recently.