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Coal crisis looms over multibillion tender row
View(s):A multibillion rupee tender to procure coal for the Lakvijaya power plant in Norochcholai has run into controversy for a third time, raising fears of a delay in replenishing stocks.
The Ceylon Electricity Board (CEB) has coal only till mid-September, authoritative sources said. Based on a recommendation by the Ministry of Power and Energy, the Lanka Coal Company (LCC) called for tenders in April 2015 to procure a record 6,750,000 tons of coal on a three-year contract. It is one of the biggest tenders in recent times, running into at least Rs. 50 billion.
Till now, only one-year contracts were awarded for far lower quantities of coal. It was on a Cabinet decision that this was amended to a three-year contract. The LCC is a Government-owned company, set up to procure and supply coal for coal fired thermal plants.
Seven bidders were shortlisted by a Technical Evaluation Committee (TEC) which was appointed by the Standing Cabinet Appointed Procurement Committee (SCAPC). One was disqualified. Of the remaining six, Noble Resources International Pte Ltd, a Hong Kong-based company listed in Singapore, was identified as meeting tender requirements at the lowest price.
Despite this, the SCAPC awarded the contract to M/s Swiss Singapore Overseas Enterprises Pte Ltd. Now, four of the shortlisted bidders have gone to the Procurement Appeal Board (PAB) against the selection. They are Noble, Suek AG, Adani Global Pte Ltd and Liberty Commodities Ltd. The PAB, based at the Presidential Secretariat, is yet to arrive at a decision even two weeks after the appeal period ended.
It is contended that the SCACP changed its decision based on a June 29-datelined letter written by Swiss Singapore seeking an adjustment in price evaluation criteria. “There is documented, direct involvement by this party,” said an authoritative official source. “Nobody can deny that.”
The LCC bid document clearly states that “no Bidder shall contact LCC or any other person or organization involved on any matter relating to its Bid, from the time of the opening of Bids to the time the Contract is awarded.” It asserts that, “Any effort by a Bidder to influence LCC in LCC’s Bid evaluation, Bid comparison or Contract Award decision may result in rejection of the Bid.”
It is also alleged that the evaluation criteria were subsequently changed to accommodate Swiss Singapore. This was in contravention to official positions held at two pre-bid meetings where TEC members clearly stated that all requirements specified in the bidding document would remain unchanged.
Swiss Singapore’s interference in the process and the SCACP’s response to it are now an open secret. However, the PAB has not even met to consider the four complaints before it. If the tender is not finalised at least by August 1, there is a possibility that Lakvijaya will not get its coal by mid-September.
To prevent a shutdown of the plant, the Ministry of Power and Energy is in the process of preparing a spot purchase tender. It will be floated by the LCC. While there may not be a price disadvantage in spot buying, it might be difficult to procure the coal on time.
“Coal is a commodity and transport takes ten days,” said an official source. “Loading and unloading takes five to six days, barging another few days. There is a lot of waiting and sailing time. These are issues that can drop up during a short period of time.”
LCC Chairman Maithri Gunaratne refused to comment. The coal tenders ran into trouble twice before, in 2014 and 2013. Both times, there was an outcry over the selection of Swiss Singapore as the successful bidder. At the last round in 2014, five out of six companies were dismissed, leaving just Swiss Singapore in the running.