• Denies issues in tender procedure 
• Penalties imposed; vows costs won’t hit public
• Rs. 15 b subsidy for low-usage consumers

President and Finance Minister Anura Kumara Dissanayake acknowledged in Parliament yesterday (7) that substandard coal supplied to power plants has affected electricity generation, but maintained that there were no issues with the tender procedure and that the problem lay with suppliers failing to provide coal of the required quality.

Delivering a statement, he said: “True, there is a quality issue with the coal. But, this is not a problem with the tender. The problem is the supplying company has not provided coal of the correct standard.”

Explaining the reasons behind rising electricity costs, the President said that the issue surrounding electricity bills has arisen due to three main factors. “First, the water levels in reservoirs have dropped, forcing us to generate more electricity from thermal power plants. Second, the prices of furnace oil, naphtha and diesel have increased. Third, due to the low quality of coal, we are producing fewer electricity units and have to generate the balance from other plants at an additional cost,” he said.

Providing details on power generation, Dissanayake said that power plants have been operating continuously in recent days but were still unable to produce the expected output. “Normally, we should generate about 270 units from each plant. Recently, one plant generated 270 units, another 266 units and yet another around 244 units. Although the installed capacity is 900 megawatts (MW), we are actually getting only about 810 MW,” he said. He added that each plant consumes about 30 MW internally to maintain operational efficiency.

Explaining the coal testing procedure, the President said that coal shipments are examined by designated laboratories before shipment and again after arrival. “Before loading, the laboratory sends us a report saying that the coal has passed the relevant tests. Based on that, we pay 80 per cent. The remaining 20% is paid only after testing again at an Indian laboratory,” he said. According to him, three coal shipments have failed quality tests so far, though others have passed laboratory testing despite power generation remaining below the expected levels.

He said that the Government has taken steps to withhold payments and impose penalties where necessary. “For some shipments, we have withheld the remaining 20% payment. In some cases, we have imposed penalties. There are also cases where we have not paid even the initial 80%,” he said. 

He also revealed that significant penalties have already been imposed on suppliers. “In one instance, a shipment was supplied at US $ 98 per tonne. After applying penalties, the price dropped to below $ 64 per tonne. We impose fines, and if they refuse to pay, we will take legal action,” he said.

The President stressed that any additional costs caused by the use of diesel due to poor-quality coal would be recovered from the supplier companies and not passed on to the public. “If we have to produce electricity using diesel because of poor-quality coal, the additional cost will be recovered from the relevant company. It will not be added to the electricity bills of citizens,” he said.

Despite these actions, he admitted that rising global fuel prices and the increased reliance on diesel generation continue to create financial pressure on the power sector.

The President said that part of the financial burden caused by substandard coal would be borne by the supplier companies and the National System Operator (Private) Limited. “The portion of electricity lost due to poor-quality coal must be borne by the company. That burden will not be placed on the public,” he said.

As a relief measure, Dissanayake announced that electricity consumers using less than 90 units per month would receive a subsidy. “We have decided to provide a subsidy to consumers who use less than 90 units. We are allocating Rs. five billion per month, which amounts to Rs. 15 billion over three months,” he said.

He further said that current estimates indicate that losses of about Rs. 32 billion could occur over a three-month period, of which approximately Rs. 15 billion will be borne by the Government (However, the President did not specify what these losses were related to). "Around Rs. seven billion of that related to coal issues will be recovered from suppliers. This is the method that we have adopted. If there is a better method, we are prepared to hear it,” the President added.