• 300,000 MT of coal to be sourced for standby
• Tender process to commence this week if needed
• Only registered suppliers eligible to participate
• GCV drops to 6,032 kcal/kg in first delivery of controversial stock

Cabinet approval has been granted to procure 300,000 MT of coal on an emergency procurement basis to address any shortages that may arise if the current controversial long-term coal tender has to be stopped due to quality failures, The Sunday Morning reliably learns. 

Ministry of Energy Secretary Prof. Udayanga Hemapala confirmed to The Sunday Morning that the ministry had received Cabinet approval. However, he stated that the coal would be procured only if necessary. 

“This will be an emergency procurement, not spot tendering,” he clarified, adding that the tender would be floated only among registered suppliers and that the tender procedure would commence this week. 

As of yesterday (31 January), neither the Lanka Coal Company (LCC) nor the ministry had decided to cancel the long-term coal tender, despite quality concerns raised regarding the first two shipments. This reluctance has drawn criticism from Opposition politicians.

Trident Chemphar Ltd. was awarded the long-term tender to supply 1,500,000 ±10% MT of coal for the period December 2025 to April 2026, with some transparency and energy sector commentators criticising the tender process.

According to the LCC, six shipments have already been unloaded by the end of last week. Reports of the first two shipments have been received; however, reports for the remaining shipments are still awaited. 

As per the Cotecna report, seen by The Sunday Morning, the dry basis ash content of the first shipment is 22.42%, and the Gross Calorific Value (GCV) is 6,032 kcal/kg. The second shipment shows an ash content of 16.67% and a GCV of 6,535 kcal/kg. 

According to the sample tender document published by the LCC, coal will be rejected if the GCV is less than 5,900 kcal/kg, total moisture exceeds 16% by weight, or ash content is more than 16% by weight. 

Nevertheless, despite the report findings, addressing a press conference last week, LCC Chairman Jayantha Rathnayake claimed that only the first shipment’s quality was in question, while the second shipment had no such quality issues. However, he said that they were awaiting the reports in relation to the remaining shipments. 

Sources close to the matter told The Sunday Morning that even if one parameter, as prescribed in the bidding document, was not fulfilled, the entire shipment should be cancelled. Thus, they said that the first two shipments should be considered of low quality and opined that the tender should have been cancelled already. 

“The delay in cancelling the tender will result in Sri Lanka being a dumping yard for low-quality coal. Even if the quality of the shipments already unloaded is proven to be low, Sri Lanka has no mechanism or facilities to re-export imported coal. The damage has already been done,” the highly-placed sources claimed. 

Sources also highlighted the termination clause, stressing that there was no requirement to prove that two consecutive coal shipments are of low quality to cancel the agreement; the agreement can be cancelled by proving the quality of any two coal shipments of the agreed tender.

As per Clause 3.11 (Termination), either party may terminate the agreement by providing 30 days’ written notice upon the occurrence of an event of default by the other party, unless the default is cured or remedied within the specified notice period. 

Further, in accordance with Clause 5.2 of the Schedules (LCC Reject Value of Coal), the LCC is entitled to terminate the contract if two separate coal shipments are found to be outside the prescribed minimum or maximum quality tolerance limits based on sample testing conducted at both the load port and the plant jetty.

The LCC also reserves the right to terminate the agreement in cases of frequent and significant deviations in coal quality parameters between load port and jetty test reports, as confirmed through reference sample verification. 

In the event of termination due to the seller’s breach, the buyer may encash the performance security, cancel payments for undelivered supplies, and recover any resulting losses or expenses. Conversely, if termination arises from the buyer’s breach, the performance security shall be released to the seller, payments already made shall not be refunded, and the buyer shall indemnify the seller for any direct losses or expenses incurred.

Referring to the prices, the sources also urged the Government to adjust prices according to the indexes applicable to the relevant quality of the coal. 

“Even though the Government now claims that the prices are low, on the other hand, the quality is also low. Therefore, prices should be checked relative to the respective quality of the coal, not just according to what is written in the agreements,” the sources claimed.