Coal importers demand 50pc cut in paid-up capital requirement

ISLAMABAD: Coal importers have asked the government to reduce a Rs100 million paid-up capital requirement for a company to participate in a bid to supply the solid fuel for energy, cement, and other industries to Rs50 million, saying the high requirement of the capital was hindering many companies to participate in the competition and only a few companies always win the bid.

The National Electric Power Regulatory Authority (NEPRA) held a public hearing with chairman of the authority Tauseef H. Farooqi in the chair to address concerns raised by independent power producers (IPPs) and coal suppliers in the existing approved guidelines for buying Afghan and non-Afghan coal on a spot basis.

During the hearing, it was noted that there was a condition of Rs100 million paid-up capital for the coal supplier company, and suggested reducing it to Rs 50 million to open entry for more coal suppliers to participate in bids. The regulator has however expressed its agreement with the suggestion.

The hearing was held with an aim to seek comments from stakeholders on how to optimise the existing spot purchase guidelines and bring in more competition. A large number of representatives of various stakeholders including the ministry of Energy, Central Power Purchasing Agency, Private Power Infrastructure Board, Thar Coal Energy Board, IPPs, coal experts, journalists, the general public, coal importers, and suppliers etc.

It was informed that only two companies had participated at a time when the condition of Rs100 million paid-up capital was enforced. However, as many as 35 companies participated in coal import bids, and therefore, it was agreed to Rs50 million paid-up capital condition.

In existing guidelines, bidders are to submit bid bonds at the time of submitting bids for coal imports. It was suggested that successful bidders should submit a performance guarantee which would replace with a bid bond. The regulator also agreed to the proposal.

During the hearing, NEPRA chairman said that he had suggested Prime Minister to establish a coal authority to properly deal with coal imports and coal-based power plants. Some stakeholders also raised the issue of introducing conditions of minimum experience for the coal suppliers. They suggested that coal suppliers should have at least two years of experience to participate in the bids. However, some interveners opposed this condition, saying that it would block the entry of new coal supplier companies and strengthen the monopoly of some companies.

Chinese company officials said that the rationale behind experience was that coal suppliers with a lack of experience could create an operational issue when they enter the market. At present, there are no defined criteria for coal traders.

However, some stakeholders said that the power sector was regulated and therefore, there should be a minimum experience for coal suppliers. Another idea floated during the public hearing was to pre-qualified companies should be allowed to participate in bids for coal supplies. Some stakeholders also opposed this proposal saying that it would also block the entry of some companies in bids.

Chairman NEPRA said that object was to facilitate the coal suppliers and create completion for cheaper coal to feed power plants. Pakistan wanted to import coal from Afghanistan in Pak currency as the country did not have the dollar. He said that they did not want to place restrictions on the import of coal.