Govt tightens imported coal procurement to save Rs380m annually

August 25, 2026 (MLN): Coal-fired power plants procuring imported coal have been directed to purchase only from the contracted supplier offering the highest discount against the applicable international benchmark, with plants barred from sourcing coal from suppliers offering lower discounts while a higher-discount contract remains active.

The measure, introduced as the first phase of reform in coal procurement, is expected to generate estimated annual savings of Rs380m for electricity consumers without requiring any additional investment.

The decision follows a review of actual procurement data, contractual arrangements and market practices across Pakistan's coal-fired power fleet, which has a combined capacity of approximately 5,280MW relying wholly or partly on imported coal.

This includes three major 1,320MW plants at Port Qasim, Hub Power (HUBC) and Sahiwal, along with the Lucky and Jamshoro plants, which also have the capability to use imported coal.

Imported coal prices are generally linked to the API-4 international benchmark, with the price ultimately paid by a plant depending on the discount it negotiates against this benchmark with its supplier. The review identified the following inefficiencies in the prevailing procurement practices:

IPPs have been undertaking competitive bidding for coal procurement since late 2022, and the "best available discount" principle is now being enforced as an immediate measure alongside the review's findings.

Separately, the Power Division has proposed two additional provisions for incorporation into the Coal Procurement Guidelines, currently under consideration:

Both proposed provisions have been requested to apply with immediate effect for coal procurement once incorporated into the guidelines.

The coal procurement review has been described as part of a continuing series of corrective measures aimed at reducing costs for electricity consumers by addressing inefficiencies in fuel procurement across the power sector.

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