News
Coal crisis: Minister seeks Cabinet approval for emergency purchases
View(s):By Damith Wickremasekara and Niranjala Ariyawansha
Cabinet approval has been sought to urgently buy coal from two companies to meet the immediate requirements of the Lakwijaya coal power plant, as suppliers have put forward tighter payment demands.
The Sunday Times learns that citing a possible delay in supplies reaching the country and the risk of no suppliers coming forward for the tender, Power and Energy Minister Kanchana Wijesekara has sought permission from the Cabinet to obtain nine shipments from the two companies.
Cabinet approval has been sought to buy 300,000MT under a 180-day credit facility as an emergency purchase, but the minister has claimed that the process could take at least two months.
Accordingly, he has proposed the purchase of emergency supplies of four shipments from Black Sand Commodities FZ-LLC in the United Arab Emirates and five shipments from Singapore Overseas Enterprises Ptd Ltd.
This is while taking a decision to call for open tenders to supply 2.25 million MT of coal. The tender period has been reduced from 42 days to 21 days.
The developments came after the coal tender that was awarded on August 25 was cancelled by the Cabinet on Thursday after the selected supplier informed its inability to perform the tender citing concerns on the impact on legal cases filed and payment guarantee risks.
Meanwhile, suppliers have demanded new tight payment terms to expedite provision of the balance 1.142 million MT of coal which was procured last year annd due to be unloaded in December.
Lanka Coal Company (LCC) General Manager Namal Hewage said that 21 such shipments were due to arrive.
Accordingly, the supplier Swiss Singapore (Pvt) Ltd., has now requested 100% of total payment prior to unloading stocks of coal, that is 30% of the payment when nominating the vessels and 70% before unloading.
Earlier it was 80% and 20%, where 80% was on arrival of shipping docs and the balance after obtaining unloading port test reports.
The first shipment from this is scheduled to reach Sri Lanka between October 20 and 25.
LCC took steps to expedite bringing in balance coal shipments since, at present the coal stocks in possession of the Lakwijaya Power Plant at Norochcholai are sufficient only until October 28.
A Lakvijaya Power Plant official said that since a coal ship could reach the country within 30 days and if it was possible to obtain new stocks as planned, it would not be necessary to impose severe power cuts.
He alleged that the reason for this new situation was because of the influence brought to bear by unsolicited bidders. This resulted in the government cancelling the tender which was awarded by LCC on August 25, subsequent to a proper tender process to supply coal until 2025.
The General Manager also said that the People’s Bank where the Ceylon Electricity Board’s account is active, had informed the LCC it was not possible to open Letters of Credit (LCs) for the supply of coal and this also had an impact on the new payment conditions.
Russia-based Black Sand Commodity (Pvt) Ltd had won the tender for the supply of 4.2 million MT of coal required for the Lakwijaya Power Plant at Norochcholai until 2025.
This was while providing the country with six months credit facilities.
However, in the guarantee certificate the Central Bank (CBSL) had given Black Sand Commodity (Pvt) Ltd., it had been mentioned, “subject to the funds availability at the time of payment.”
On September 7, Ven. Omalpe Sobitha Thera filed a fundamental rights petition in the Supreme Court against this tender.
An LCC spokesman said that in addition, a civil organisation had informed the People’s Bank in writing not to open an LC for Black Sand Commodity (Pvt) Ltd.
Sources said that accordingly, the People’s Bank had informed LCC in writing that it was unable to open an LC for Black Sand Commodity (Pvt) Ltd.
As a result, Black Sand had expressed its unwillingness to sign the contract to supply coal, until legal actions were resolved.
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