Pakistan power regulator weighs Port Qasim coal procurement extension amid tariff risk

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Port Qasim coal procurement review

Highlights

NEPRA is likely to reject Port Qasim Electric Power Company Limited's request for a two-month coal procurement extension amid record U.S.$2.10/tonne South African coal discount.
Authorities, including the Prime Minister's Office and Federal Board of Revenue, have launched inquiries into PQEPCL's procurement delays and possible avoidance of competitive bidding for coal.
Coal procurement costs, linked to indices such as API4 and ICI3, directly impact fuel charge adjustments and electricity tariffs, heightening scrutiny on PQEPCL's supply decisions and consumer cost implications.

Regulatory review and procurement dispute

As reported by Pakistan Business Recorder, the National Electric Power Regulatory Authority is unlikely to grant another extension to Port Qasim Electric Power Company Limited for coal procurement under an interim arrangement, even as the company seeks a further two-month approval in writing, according to sources.

The dispute focuses on an ongoing procurement process in which bids are said to include a discount of U.S.$2.10 per metric tonne for South African-origin coal, described in the available information as the highest discount obtained in the company's procurement history. The case for moving ahead with competitive bidding rests on the view that eligible and responsive offers at that level would improve transparency and help protect consumers from avoidable costs.

PQEPCL is alleged to be trying to continue purchases from existing supplier arrangements at a lower discount while delaying, withholding or cancelling the current bidding process despite the availability of the South African offer. An insider said NEPRA could require the company to proceed through open bidding and evaluate eligible offers under the applicable terms and conditions instead of favouring lower-discount arrangements.

The issue is also expected to surface at NEPRA's public hearing on the Fuel Charges Adjustment for September 2026 on Thursday. The Prime Minister's Office has reportedly ordered an inquiry, while the Federal Board of Revenue has also entered the matter in light of court orders, adding to broader scrutiny that already includes the National Accountability Bureau's focus on the power sector.

Tariff implications and supply terms

NEPRA's stance matters because coal procurement costs feed into fuel-related power generation expenses and can ultimately affect electricity tariffs through the adjustment mechanism. The Power Division is also said to be concerned that commercially unfavourable procurement could increase the financial burden borne by consumers.

The procurement documents cited in the case require the bidder to sell and deliver coal in line with the agreed delivery schedule, with the purchaser required to notify the bidder in writing of the aggregate quantity needed at least 45 days before the expected discharge of a shipment. Pricing differs by origin, with South African coal linked to the monthly average FOB Richards Bay index, published by Argus/McCloskey as the API4 Index, and Indonesian coal linked to the monthly average FOB Indonesia Coal Index, published by Argus/Coalindo as the ICI3 Index.

Those competing positions raise questions over the commercial terms available to PQEPCL, the treatment of bids already submitted and the basis for any decision to stay with incumbent suppliers instead of moving to competitive offers. The Port Qasim plant in Karachi relies on coal deliveries through a dedicated unloading jetty, making the procurement outcome important for both fuel security and compliance with bidding rules.

The allegations over procurement practices and any preference for existing suppliers have not been independently established in the information provided. PQEPCL's response and NEPRA's formal position are still needed to clarify the company's justification for seeking another extension and its approach to the competing bids.

Our earlier article on the proposed Port Qasim aluminium smelter outlined a plan to secure a dedicated power supply using a back-to-back power purchase agreement structure involving CPPA-G and PQEPCL, targeting over US$5 billion in annual exports at full development. It also explained how the project’s approvals were tied to a conditional settlement of the long-running late payment interest dispute, including a proposed waiver and payment timeline linked to key deadlines through October 2026 and an effective date aimed for November 2028.

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