• CEB slow paddles as it claims delays in ability to quantify financial damage from substandard coal saga
• Authorities once again use opportunity to prepare for emergency power purchasing
• Substandard coal stock generated nearly 807 kcal/kg less per tonne
• Ash concentration in one shipment nearly double the standard of ash usually tendered for power plant 

Sri Lanka’s coal procurement controversy has entered a precarious phase, with the Ceylon Electricity Board (CEB) still unable to quantify the financial damage from allegedly substandard coal shipments even as approvals have already been secured for emergency power purchases to plug potential electricity shortfalls. 

With laboratory reports pointing to inconsistent coal quality and reduced generation efficiency at the Lakvijaya Power Plant in Norochcholai, officials admit that compensation and loss calculations remain incomplete. Yet they said contingency plans for costly stopgap energy procurement were moving ahead, calling it a precautionary move. 

The situation has renewed scrutiny about whether poor coal quality, weak oversight, and opaque contracting have pushed Sri Lanka towards another avoidable energy crisis, where taxpayers could end up paying twice: first for inferior coal and then for expensive emergency power to cover the gap.

Quality gamble

One week after The Sunday Morning reported allegations that low-quality coal supplied by Indian trader Trident Chemphar Ltd. may be compromising electricity generation and public health, a closer examination of discharge port test results and procurement records raises troubling questions not only about a single shipment, but about the integrity of the country’s coal procurement process itself. 

It is learnt that two consecutive coal shipments analysed by Cotecna Inspection India Ltd., an internationally recognised independent surveyor, reveal a significant disparity in coal quality, particularly in ash content, a critical parameter that directly affects combustion efficiency, environmental emissions, and long-term plant performance. 

The findings have once again resulted in an explosion of demands from Opposition politicians, trade unions, energy analysts, and environmentalists for the immediate public release of all test reports, warning that the consequences of continued opacity could extend far beyond short-term fuel shortages. 

As of last week, five shipments have been unloaded, and variations in the Gross Calorific Value (GCV) of coal shipments had been observed, with reported figures including 5,904, 6,053, 6,162, 6,174, and 6,193 kcal/kg, which could impact plant efficiency. However, reports have only been received for two shipments to date. 

Based on laboratory results in the two initial inspection reports seen by The Sunday Morning, the GCV shows a clear statistical difference between the two shipments. The MV NS Guangzhou cargo recorded a GCV of 6,327 kcal/kg (as received), while the MV Ceylon Breeze cargo recorded 5,520 kcal/kg. This represents an absolute difference of 807 kcal/kg, meaning the Guangzhou shipment provides approximately 14.6% higher energy content per kilo.

In practical terms, for every 1,000 MT of coal burnt, the Guangzhou cargo delivers significantly more heat energy, resulting in lower specific fuel consumption and improved boiler efficiency, whereas the Ceylon Breeze cargo requires a larger quantity of coal to achieve the same output.

Statistically, the higher GCV indicates better coal quality and lower inherent losses from moisture and ash, while the lower GCV shipment may increase operational costs, handling volumes, and ash generation. Therefore, the reports confirm that shipment variability has a measurable and economically significant impact on plant performance and fuel efficiency.

Ash crisis

In the meantime, another serious concern has been raised regarding the ash value. 

According to the Cotecna discharge port analysis of the first shipment, carried aboard MV Ceylon Breeze, the coal recorded an ash content exceeding 21% on an air-received basis. This figure is nearly double the Lanka Coal Company’s (LCC) standard ash value of 11% specified for coal supplied to the Norochcholai power plant. 

While such coal may still be tradeable within broad international market tolerances, engineers working closely on the subject within the CEB point out that it represents a materially inferior fuel for a base-load power plant designed to operate on relatively low-ash, low-sulphur coal. 

By contrast, the second shipment, delivered by MV NS Guangzhou, showed significantly lower ash levels in the range of 17–18%, along with better fixed carbon ratios and improved combustion characteristics. The difference between the two shipments – both sourced from South Africa and marketed under the same generic classification of ‘South African steam coal’ – highlights the variability inherent in coal supply chains and raises concerns about quality consistency across future deliveries. 

According to leading environmentalists, the environmental implications of high-ash coal are substantial. 

Ash is the non-combustible residue left after coal is burnt, and higher ash content means a greater volume of solid waste requiring collection, transport, and long-term disposal. 

Based on shipment quantities of approximately 60,000 MT, coal with an ash content of 21% generates nearly 12,600 MT of ash, compared to about 10,200 MT from coal with 17% ash – an excess of more than 2,000 MT of industrial waste from a single shipment. 

This additional ash places increased stress on electrostatic precipitators, ash slurry pumps, and disposal facilities, while also raising the risk of airborne particulate emissions and heavy metal contamination. 

Environmental groups have repeatedly warned that coal ash contains toxic elements, including mercury, arsenic, and lead, which can leach into soil and groundwater or become airborne, posing long-term health risks to nearby communities. 

Centre for Environmental Justice Senior Adviser Hemantha Withanage has cautioned that ash content above 16% significantly heightens mercury-related health risks. 

Beyond environmental damage, high-ash coal carries a hidden economic cost that is not immediately apparent in procurement contracts. 

Well-placed sources within the CEB told The Sunday Morning that approximately 117 MT of the newly imported South African coal was yielding about 285 MWh of electricity, whereas earlier Russian coal stocks of 107–109 MT generated close to 300 MWh. This represents an efficiency loss of roughly 5–6%, meaning more coal must be burnt to produce the same amount of power. 

Applied across an entire shipment of 60,000 MT, such a reduction translates into thousands of megawatt-hours of lost generation. If the same mistake with the substandard coal shipment were to be repeated, and scaled to the 23 additional shipments expected under the current procurement plan, the cumulative loss in theory could amount to tens of thousands of megawatt-hours. If such a loss were to occur, the lost energy would require replacement either through increased coal consumption or more expensive alternative power sources.

Millions lost?

Some officials within the CEB had previously warned of a shortfall in power generation due to the substandard coal. Even a modest efficiency decline can result in millions of dollars in additional costs over a single unloading season. 

While officials have pointed out that the South African coal is priced at only about $ 1.50 per tonne lower than coal previously sourced from Russia, experts caution that price-per-tonne comparisons are misleading. What ultimately matters is the cost per unit of electricity generated. 

According to them, high-ash coal, despite appearing marginally cheaper at the point of purchase, can prove significantly more expensive once efficiency losses, increased maintenance, and environmental management costs are factored in. 

In this backdrop, international benchmarks provide further context. Premium thermal coal traded under the Newcastle Index in Australia typically carries ash levels between 10% and 12%, with GCVs above 6,000 kcal/kg. Even standard South African RB2 coal supplied to power utilities generally falls within an ash range of 12–16%. Coal with ash exceeding 20% is widely regarded in global markets as lower-grade thermal coal, more suited to plants specifically engineered to handle high ash, such as some domestic Indian power stations. 

Norochcholai, however, was designed as a base-load plant fuelled by relatively clean coal, a requirement reflected in the LCC’s own technical specifications. 

Shipping documents associated with the contested shipments add another layer to the controversy. 

The tender framework governing coal procurement appears robust on paper. Clause 5.1 of the LCC specifications sets the standard ash value at 11%, with a price adjustment formula applied when ash exceeds this level. Clause 5.2 allows outright rejection if coal falls within defined reject values, while Clauses 3.4.3 and 3.5 establish clear procedures for rejection at both the load port and discharge port. Yet, despite these safeguards, the coal currently under scrutiny was unloaded and burnt almost immediately. 

At the same time, officials warn that rejecting shipments or delaying unloading could trigger a severe power crisis, particularly during the dry season when hydro resources are limited. Sri Lanka’s energy history is replete with instances where authorities have favoured rushing towards emergency power purchases, often at exorbitant cost, followed by periods of poor planning and delayed procurement decisions. On multiple occasions, such purchases have drawn serious criticism about corruption. 

Coal quality, experts stress, is not a technical footnote. It directly affects electricity costs, grid stability, environmental damage, and long-term national expenditure. As one senior CEB official noted, “Sometimes, in an attempt to save millions, the country risks losing billions.”

Oversight gaps

As reliably learnt by The Sunday Morning, one of the main issues regarding energy security resulting from the coal quality issue arises as the Energy Ministry has opted for a long-term tender instead of the mixed procurement plan involving a spot-tendering and long-term tendering process proposed by the LCC. 

As the practice thus far has been to go for a mixed procurement plan to ensure energy security, the deviation from the initial plan, especially at a time when coal supply faces uncertainty, has been pointed out by engineers attached to the CEB. 

LCC Chairman Jayantha Rathnayake said that all coal shipments scheduled for January had already arrived in Sri Lanka, noting: “All six shipments that were planned for January have reached the country.”

He also addressed concerns over discrepancies between coal quality measured at the load port and the discharge port, stating that compensation mechanisms were already in place. 

According to him, the estimated compensation for the difference stands at $ 1.2 per metric tonne, with a reference value of $ 98.50 per unit.

Responding to public concerns about ash content, Rathnayake stated that experts had given an assurance that increased fly ash generation posed no significant operational or environmental risk, and that there was no danger of spillage. 

However, according to CEB Deputy General Manager Ramya Gunaratne, the board is still in the process of calculating the financial losses it may incur due to the alleged supply of low-quality coal to the Lakvijaya Coal Power Plant. 

He stated that the calculation of losses and compensation would take into account the additional cost of power generation required to cover the shortfall in coal-based electricity generation caused by quality-related issues. 

“Approvals have already been obtained to proceed with emergency power procurement in the event of a power shortage,” Gunaratne said, noting that the final loss or compensation figure could only be determined after receiving all coal quality reports from both the load port and the discharge port. 

Meanwhile, the Lakvijaya Power Plant management told The Sunday Morning that precautionary operational measures were being implemented to minimise the impact of lower-quality coal on power generation. 

Nevertheless, The Sunday Morning learns that the CEB has yet to make any decision on cancelling or suspending the tender, as officials are still awaiting the pending laboratory results from the remaining coal shipments. 

A senior CEB source close to the matter told The Sunday Morning that this delay posed a serious dilemma: by the time all test reports are received and verified, most – if not all – of the consignments scheduled for the season are likely to have already been discharged, consumed, and paid for. 

Once unloaded and the payments are processed, the source claimed, there was effectively no practical or legal avenue to reject the coal or recover losses, raising concerns that any quality shortcomings may only be confirmed after the damage had already been done.