EDITORIAL: A Power Division review has found that coal-fired power plants buying from the same international suppliers against the same recognised benchmark were receiving wildly different discounts, ranging from just $0.25 to $7.12 per metric ton.
The government has now responded with a straightforward rule: plants must procure from the contracted supplier offering the best available discount.
The measure could save around Rs380 million a year without requiring any additional investment. It is a sensible intervention, no doubt, yet it also raises the rather uncomfortable question of why something so obvious was allowed to continue for so long.
The discrepancies hardly required extraordinary forensic work to uncover. Procurement data, contractual arrangements and benchmark-linked pricing were already available, and the inefficiencies became apparent once officials actually compared them. In some cases, backup arrangements carried better discounts than primary supply agreements.
In others, plants continued buying from suppliers offering poorer terms even though contracted alternatives were offering better discounts.
When fuel costs ultimately feed into electricity tariffs, such decisions have consequences far beyond the procurement departments making them.
That makes the new policy particularly welcome. Requiring power plants to choose the highest available discount introduces a basic element of commercial discipline into a system where consumers ultimately bear the cost of inefficiency. Imported coal is used both by power producers and by industry, but the economics of the power sector make procurement discipline especially important.
Fuel costs are incorporated into electricity pricing, while subsidies and other fiscal interventions can leave the government carrying part of the burden when sector costs rise. An unnecessary dollar added to a power plant’s coal bill can therefore travel through tariffs, subsidies and public finances before eventually landing on taxpayers and consumers.
Yet the simplicity of the solution exposes the deeper problem. The state machinery has once again discovered an avoidable cost only after allowing it to persist. There was no technological barrier preventing officials from comparing discounts across suppliers.
There was no need for a costly new institution, consultant or elaborate reform programme. Someone simply had to examine the numbers, identify the inconsistencies and ask why plants were not purchasing on the most favourable terms already available under their contracts.
This is precisely the kind of administrative failure that repeatedly inflates the cost of government. Small inefficiencies become entrenched because nobody is required to challenge established practice, and established practice eventually acquires the status of procedure. By the time someone finally asks a basic commercial question, consumers may have been paying the price for years.
The Rs380 million in projected annual savings may appear modest against the enormous financial problems of the power sector, but that misses the larger point. If one review of one procurement component can uncover savings without fresh investment, how many similar leakages remain buried elsewhere?
The Power Division is therefore right to extend this data-driven approach across the sector. Procurement of fuel, maintenance contracts, transmission costs, administrative expenditure and other pass-through items should all be subjected to the same scrutiny.
The objective should be simple: where public money or consumer tariffs ultimately absorb the cost, commercial decisions must be transparent, competitive and demonstrably efficient. The suggestion from a power plant representative that coal could instead be procured through competitive bidding also deserves examination on its merits rather than dismissal.
There is also a strong case for publishing the results of these reviews. Consumers who have endured repeated tariff increases deserve to know where avoidable costs are being identified, how long they existed and what corrective measures are producing measurable savings.
Transparency would also create pressure on individual plants and regulators to explain procurement choices that depart from obvious commercial logic.
The Power Division deserves credit for spotting this particular inefficiency and acting on it. But a government should not have to congratulate itself for discovering that buying the same product more cheaply saves money. The real achievement will come when such scrutiny becomes routine enough that these discrepancies are caught before they become part of the bill.
Copyright Business Recorder, 2026
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