News
LCC to buy 4.5 million tons of coal on long-term credit basis; CEB engineers protest
View(s):By Niranjala Ariyawansha
The Lanka Coal Company (LCC) has called for tenders for the purchase of 4.5 million metric tonnes of coal required for the Norochcholai Lakvijaya Coal Power Plant up to 2025 under a long-term credit facility.
The Cabinet Paper submitted by Power and Energy Minister Kanchana Wijesekera for this purpose was granted approval on July 18.
Accordingly, the LCC called for tenders on July 21 from pre-qualified short-listed registered suppliers (solicited) and unsolicited suppliers with credit facilities. The deadline is August 10.
A senior LCC officer said the company hoped to obtain a good price and credit facilities because it would be buying a large stock of coal.
He said that, unlike the Litro Gas tender, this procurement process would be done based on an index price – meaning the price could be adjusted according to the market price and not for a fixed price.
“Due to the economic crisis prevailing in the country, it is a huge problem for our banks to issue letters of credit. International banks do not accept our bank guarantees. There is great uncertainty. In this procurement process, we expect credit facilities for at least four months. However, the problem for suppliers is that we do not have a payment method,” he said.
The official said the stock the company has at present was sufficient until the first week of October.
He said in July last year, they called for proposals for the supply of coal. Although the LCC received several Government-to-Government (G to G) proposals, all were on behalf of private companies.
However, the Ceylon Electricity Board Engineers Union (CEBEU) has expressed strong objection to the plan.
The CEBEU points out that since the world market prices fluctuate from time to time, the company is likely to suffer a huge loss from this long-term purchase plan.
The union compared the tender to the controversial Litro gas purchase. The Litro Gas Company rejected a low bid of USD 96 and purchased 100,000 metric tonnes of gas at USD 129 per metric tonne, prompting an inquiry from the Parliament Committee on Public Enterprise.
“We do not believe that this is a suitable time to call for tenders for the supply of coal up to 2025. Based on this tender it is possible that a price as high as USD 350-370 per metric tonne of coal could be received. However, a metric tonne of Russian coal can be purchased at less than USD 200. The question we have is why no attempt is being made to buy Russian coal at a lower price,” the CEBEU questioned.
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